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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-Q



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(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 24, 2005



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



FOR THE TRANSITION PERIOD FROM
TO



Commission File Number: 333-110029



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Broder Bros., Co.

(Exact name of Registrant as specified in its charter)



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|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Michigan                                                      |  | 38-1911112                         
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification No.)
|                                                              | 
|Six Neshaminy Interplex, 6thFloor, Trevose,
PA                |  | 19053                              
|(Address of principal executive office)                       |  | (Zip code)                         



(215) 291-6140

(Registrants telephone number, including area code)



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Indicate by
check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that each co-registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x    No ̈



Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ̈No  x



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ̈No  x



As of November 4, 2005, there were 1,000,000 shares of Class L, Series 1 common stock outstanding; 966,791 shares of Class L, Series 2 common stock outstanding; 2,814,992 shares of Class L, Series 3 common stock outstanding; 2,721,509
shares of Class L, Series 4 common stock outstanding; 10,211,111 shares of Class A common stock outstanding; and 29,025,688 shares of Class B common stock outstanding.



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1



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##### Table of Contents



BRODER BROS., CO. AND
SUBSIDIARIES



Quarterly Report for the Period Ended
September 24, 2005



Table of Contents



|                                                                                                                    |  |     
|------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                    |  | PAGE
|                                                                                                                    | 
|PART I. Financial Information                                                                                       |  |     
|                                                                                                                    | 
|Item 1. Consolidated Financial Statements (Unaudited)                                                               |  |     
|                                                                                                                    | 
|Consolidated Balance Sheets as of September 24, 2005 and December 25, 2004                                          |  | 3   
|                                                                                                                    | 
|Consolidated Statements of Operations for the Three and Nine Months Ended September 24, 2005 and September 25, 2004 |  | 4   
|                                                                                                                    | 
|Consolidated Statements of Cash Flows for the Nine Months Ended September 24, 2005 and September 25, 2004           |  | 5   
|                                                                                                                    | 
|Notes to Consolidated Financial Statements                                                                          |  | 6   
|                                                                                                                    | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                       |  | 15  
|                                                                                                                    | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                  |  | 25  
|                                                                                                                    | 
|Item 4. Controls and Procedures                                                                                     |  | 26  
|                                                                                                                    | 
|PART II. Other Information                                                                                          |  |     
|                                                                                                                    | 
|Item 1. Legal Proceedings                                                                                           |  | 26  
|                                                                                                                    | 
|Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities                            |  | 26  
|                                                                                                                    | 
|Item 3. Defaults Upon Senior Securities                                                                             |  | 26  
|                                                                                                                    | 
|Item 4. Submission of Matters to a Vote of Security Holders                                                         |  | 26  
|                                                                                                                    | 
|Item 5. Other Information                                                                                           |  | 26  
|                                                                                                                    | 
|Item 6. Exhibits                                                                                                    |  | 26  
|                                                                                                                    | 
|Signatures                                                                                                          |  | 27  



Broder Bros., Co. (the
Company) is the issuer of $225.0 million aggregate principal amount of 111/4% Senior Notes due
October 15, 2010. A total of $175.0 million aggregate principal amount of the Senior Notes (the Initial Notes) were the subject of an exchange offer that was registered with the Securities and Exchange Commission (SEC)
(File No. 333-110029). A total of $50.0 million aggregate principal amount of the Senior Notes (the Notes) were the subject of an exchange offer that was registered with the SEC (File No. 333-123991). The Notes are additional
debt securities issued under an indenture dated September 22, 2003, under which the Company previously issued the Initial Notes.



As used herein, unless the context indicates otherwise: (i) Broder, Company, we, our, and us,
refer collectively to Broder Bros., Co. and its consolidated subsidiaries; (ii) Alpha refers to the Companys Alpha Shirt Company Division for periods after its acquisition by the Company and to Alpha Shirt Holdings, Inc. and
its consolidated subsidiaries for periods prior to such acquisition; (iii) Broder division refers to the Companys Broder Division; and (iv) NES refers to the Companys NES Clothing Company Division for
periods after the acquisition by the Company and to NES Clothing Holdings Trust and its consolidated subsidiaries for periods prior to such acquisition.



2



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##### Table of Contents



PART I. FINANCIAL
INFORMATION



|Item 1. | Consolidated Financial Statements (Unaudited)
|------- | ---------------------------------------------



BRODER BROS., CO. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                                                                                                     |  |                                                 |         |   |                  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                                                                                                                     |  | September 24,2005                               |         |   | December 25,2004 |  
|                                                                                                                                                                                                                                                                     |  | (unaudited)                                     |         |   |                  |  
|                                                                                                                                                                                                                                                                     |  | (dollars in thousands,except per share amounts) |        
|ASSETS                                                                                                                                                                                                                                                               |  |                                                 |         |   |                  |   |         |  
|Current assets                                                                                                                                                                                                                                                       |  |                                                 |         |   |                  |   |         |  
|Cash                                                                                                                                                                                                                                                                 |  | $                                               | 6,721   |   |                  | $ | 2,321   |  
|Accounts receivable, net of allowance for doubtful accounts of $5,564 at September 24, 2005 and $4,664 at December 25,
2004                                                                                                                                          |  |                                                 | 103,142 |   |                  |   | 87,689  |  
|Finished goods inventory                                                                                                                                                                                                                                             |  |                                                 | 230,404 |   |                  |   | 174,789 |  
|Prepaid and other current assets                                                                                                                                                                                                                                     |  |                                                 | 5,789   |   |                  |   | 4,859   |  
|Deferred income taxes                                                                                                                                                                                                                                                |  |                                                 | 8,774   |   |                  |   | 8,809   |  
|                                                                                                                                                                                                                                                                     |  |                                                 |         |   |                  |   |         |  
|Total current assets                                                                                                                                                                                                                                                 |  |                                                 | 354,830 |   |                  |   | 278,467 |  
|Fixed assets, net                                                                                                                                                                                                                                                    |  |                                                 | 15,997  |   |                  |   | 14,570  |  
|Goodwill                                                                                                                                                                                                                                                             |  |                                                 | 137,077 |   |                  |   | 137,077 |  
|Other intangibles                                                                                                                                                                                                                                                    |  |                                                 | 73,384  |   |                  |   | 83,409  |  
|Deferred financing fees, net                                                                                                                                                                                                                                         |  |                                                 | 14,811  |   |                  |   | 17,148  |  
|Deferred income taxes                                                                                                                                                                                                                                                |  |                                                 | 5,051   |   |                  |   | 6,004   |  
|Other assets                                                                                                                                                                                                                                                         |  |                                                 | 1,055   |   |                  |   | 1,533   |  
|                                                                                                                                                                                                                                                                     |  |                                                 |         |   |                  |   |         |  
|Total assets                                                                                                                                                                                                                                                         |  | $                                               | 602,205 |   |                  | $ | 538,208 |  
|                                                                                                                                                                                                                                                                     |  |                                                 |         |   |                  |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                                                                                                 |  |                                                 |         |   |                  |   |         |  
|Current liabilities                                                                                                                                                                                                                                                  |  |                                                 |         |   |                  |   |         |  
|Current portion of long-term debt and capital lease obligations                                                                                                                                                                                                      |  | $                                               | 1,093   |   |                  | $ | 748     |  
|Accounts payable                                                                                                                                                                                                                                                     |  |                                                 | 120,691 |   |                  |   | 115,436 |  
|Accrued expenses                                                                                                                                                                                                                                                     |  |                                                 | 15,399  |   |                  |   | 17,025  |  
|Accrued interest                                                                                                                                                                                                                                                     |  |                                                 | 12,263  |   |                  |   | 4,958   |  
|                                                                                                                                                                                                                                                                     |  |                                                 |         |   |                  |   |         |  
|Total current liabilities                                                                                                                                                                                                                                            |  |                                                 | 149,446 |   |                  |   | 138,167 |  
|Long-term debt and capital lease obligations, net of current portion                                                                                                                                                                                                 |  |                                                 | 333,216 |   |                  |   | 270,674 |  
|Deferred income taxes                                                                                                                                                                                                                                                |  |                                                 | 38,330  |   |                  |   | 42,079  |  
|Other long-term liabilities                                                                                                                                                                                                                                          |  |                                                 | 7,823   |   |                  |   | 8,929   |  
|Redeemable securities, net of employee note receivable                                                                                                                                                                                                               |  |                                                 | 2,010   |   |                  |   | 2,276   |  
|                                                                                                                                                                                                                                                                     |  |                                                 |         |   |                  |   |         |  
|Total liabilities                                                                                                                                                                                                                                                    |  |                                                 | 530,825 |   |                  |   | 462,125 |  
|Commitments and contingencies                                                                                                                                                                                                                                        |  |                                                 |         |   |                  |   |         |  
|Shareholders equity                                                                                                                                                                                                                                                 |  |                                                 |         |   |                  |   |         |  
|Class L, Series 1 common stock; par value $0.01 per share; 2,000,000 shares authorized; 963,637 shares issued and outstanding (aggregate
liquidation preference of $29,478 and $26,905 as of September 24, 2005 and December 25, 2004, respectively)                 |  |                                                 | 10      |   |                  |   | 10      |  
|Class L, Series 2 common stock; par value $0.01 per share; 2,000,000 shares authorized; 931,635 shares issued and outstanding (aggregate
liquidation preference of $21,167 and $18,297 as of September 24, 2005 and December 25, 2004, respectively)                 |  |                                                 | 10      |   |                  |   | 10      |  
|Class L, Series 3 common stock; par value $0.01 per share; 4,000,000 shares authorized; 2,778,057 and 2,771,042 shares issued and outstanding
(aggregate liquidation preference of $84,981 and $77,367 as of September 24, 2005 and December 25, 2004, respectively) |  |                                                 | 28      |   |                  |   | 28      |  
|Class L, Series 4 common stock; par value $0.01 per share; 4,000,000 shares authorized; 2,685,802 and 2,679,019 shares issued and outstanding
(aggregate liquidation preference of $61,021 and $52,616 as of September 24, 2005 and December 25, 2004, respectively) |  |                                                 | 27      |   |                  |   | 27      |  
|Class A, common stock; par value $0.01 per share; 15,000,000 shares authorized; 9,695,252 shares issued and outstanding                                                                                                                                              |  |                                                 | 96      |   |                  |   | 96      |  
|Class B, common stock; par value $0.01 per share; 35,000,000 shares authorized; 28,644,854 and 28,572,519 shares issued and
outstanding                                                                                                                              |  |                                                 | 286     |   |                  |   | 286     |  
|WarrantsClass L, Series 3                                                                                                                                                                                                                                           |  |                                                 | 1,471   |   |                  |   | 1,471   |  
|Additional paid-in capital                                                                                                                                                                                                                                           |  |                                                 | 120,228 |   |                  |   | 119,792 |  
|Accumulated other comprehensive income                                                                                                                                                                                                                               |  |                                                 | (54     | ) |                  |   | (111    | )
|Accumulated deficit                                                                                                                                                                                                                                                  |  |                                                 | (50,702 | ) |                  |   | (45,506 | )
|Treasury stock; 100,000 shares of Class A common stock; at cost                                                                                                                                                                                                      |  |                                                 | (20     | ) |                  |   | (20     | )
|                                                                                                                                                                                                                                                                     |  |                                                 |         |   |                  |   |         |  
|Total shareholders equity                                                                                                                                                                                                                                           |  |                                                 | 71,380  |   |                  |   | 76,083  |  
|                                                                                                                                                                                                                                                                     |  |                                                 |         |   |                  |   |         |  
|Total liabilities and shareholders equity                                                                                                                                                                                                                           |  | $                                               | 602,205 |   |                  | $ | 538,208 |  
|                                                                                                                                                                                                                                                                     |  |                                                 |         |   |                  |   |         |  



The accompanying notes
are an integral part of the consolidated financial statements.



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BRODER BROS., CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended September 24, 2005 and September 25, 2004



|                                              |  |                                   |         |   |                    |   |         |                    |  |   |                   |   |  |   |         |  
|--------------------------------------------- |  | --------------------------------- | ------- | - | ------------------ | - | ------- | ------------------ |  | - | ----------------- | - |  | - | ------- | -
|                                              |  | Three Months Ended                |         |   | Nine Months Ended  |  
|                                              |  | September 24,2005                 |         |   | September 25, 2004 |   |         | September 24, 2005 |  |   | September 25,2004 |  
|                                              |  | (unaudited)(dollars to thousands) |        
|Net sales                                     |  | $                                 | 255,619 |   |                    | $ | 231,305 |                    |  | $ | 715,416           |   |  | $ | 635,363 |  
|Cost of sales                                 |  |                                   | 211,441 |   |                    |   | 190,819 |                    |  |   | 586,337           |   |  |   | 522,967 |  
|                                              |  |                                   |         |   |                    |   |         |                    |  |   |                   |   |  |   |         |  
|Gross profit                                  |  |                                   | 44,178  |   |                    |   | 40,486  |                    |  |   | 129,079           |   |  |   | 112,396 |  
|Warehousing, selling and administrative       |  |                                   | 35,440  |   |                    |   | 30,417  |                    |  |   | 108,175           |   |  |   | 92,466  |  
|Restructuring and asset impairment charges    |  |                                   | 930     |   |                    |   | 181     |                    |  |   | 1,968             |   |  |   | 2,455   |  
|                                              |  |                                   |         |   |                    |   |         |                    |  |   |                   |   |  |   |         |  
|Total operating expenses                      |  |                                   | 36,370  |   |                    |   | 30,598  |                    |  |   | 110,143           |   |  |   | 94,921  |  
|                                              |  |                                   |         |   |                    |   |         |                    |  |   |                   |   |  |   |         |  
|Income from operations                        |  |                                   | 7,808   |   |                    |   | 9,888   |                    |  |   | 18,936            |   |  |   | 17,475  |  
|Other (income) expense                        |  |                                   |         |   |                    |   |         |                    |  |   |                   |   |  |   |         |  
|Interest                                      |  |                                   | 9,566   |   |                    |   | 7,416   |                    |  |   | 27,375            |   |  |   | 22,016  |  
|Change in fair value of interest rate swaps   |  |                                   | (206    | ) |                    |   | (107    | )                  |  |   | (793              | ) |  |   | (1,218  | )
|Amortization of FAS 133 transition adjustment |  |                                   | 29      |   |                    |   | 50      |                    |  |   | 86                |   |  |   | 150     |  
|Other, net                                    |  |                                   |        |   |                    |   | 139     |                    |  |   |                  |   |  |   | 573     |  
|                                              |  |                                   |         |   |                    |   |         |                    |  |   |                   |   |  |   |         |  
|Total other expense                           |  |                                   | 9,389   |   |                    |   | 7,498   |                    |  |   | 26,668            |   |  |   | 21,521  |  
|                                              |  |                                   |         |   |                    |   |         |                    |  |   |                   |   |  |   |         |  
|Income (loss) before income taxes             |  |                                   | (1,581  | ) |                    |   | 2,390   |                    |  |   | (7,732            | ) |  |   | (4,046  | )
|Income tax provision (benefit)                |  |                                   | 120     |   |                    |   | 685     |                    |  |   | (2,536            | ) |  |   | (1,690  | )
|                                              |  |                                   |         |   |                    |   |         |                    |  |   |                   |   |  |   |         |  
|Net income (loss)                             |  | $                                 | (1,701  | ) |                    | $ | 1,705   |                    |  | $ | (5,196            | ) |  | $ | (2,356  | )
|                                              |  |                                   |         |   |                    |   |         |                    |  |   |                   |   |  |   |         |  



The accompanying notes
are an integral part of the consolidated financial statements.



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BRODER BROS., CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 24, 2005 and September 25, 2004



|                                                                                         |  |                                   |          |   |                    |   |          |  
|---------------------------------------------------------------------------------------- |  | --------------------------------- | -------- | - | ------------------ | - | -------- | -
|                                                                                         |  | Nine Months Ended                 |         
|                                                                                         |  | September 24, 2005                |          |   | September 25, 2004 |  
|                                                                                         |  | (unaudited)(dollars in thousands) |         
|Cash flows from operating activities                                                     |  |                                   |          |   |                    |   |          |  
|Net loss                                                                                 |  | $                                 | (5,196   | ) |                    | $ | (2,356   | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities |  |                                   |          |   |                    |   |          |  
|Depreciation                                                                             |  |                                   | 4,628    |   |                    |   | 4,391    |  
|Amortization                                                                             |  |                                   | 12,569   |   |                    |   | 12,303   |  
|Provision for losses on accounts receivable                                              |  |                                   | 2,088    |   |                    |   | 1,670    |  
|Deferred income taxes                                                                    |  |                                   | (2,761   | ) |                    |   | (4,807   | )
|Change in fair value of interest rate swaps                                              |  |                                   | (793     | ) |                    |   | (1,218   | )
|Asset impairment charges                                                                 |  |                                   | 401      |   |                    |   | 812      |  
|Loss on early retirement of deferred compensation arrangement                            |  |                                   |         |   |                    |   | 185      |  
|Changes in operating accounts                                                            |  |                                   |          |   |                    |   |          |  
|Accounts receivable                                                                      |  |                                   | (17,541  | ) |                    |   | (18,966  | )
|Finished goods inventory                                                                 |  |                                   | (55,615  | ) |                    |   | (11,499  | )
|Prepaid and other current assets                                                         |  |                                   | (452     | ) |                    |   | 5,164    |  
|Accounts payable                                                                         |  |                                   | 35,452   |   |                    |   | 43,653   |  
|Accrued expenses and other                                                               |  |                                   | 5,310    |   |                    |   | 6,587    |  
|                                                                                         |  |                                   |          |   |                    |   |          |  
|Net cash provided by (used in) operating activities                                      |  |                                   | (21,910  | ) |                    |   | 35,919   |  
|                                                                                         |  |                                   |          |   |                    |   |          |  
|Cash flows from investing activities                                                     |  |                                   |          |   |                    |   |          |  
|Acquisition of fixed assets                                                              |  |                                   | (3,742   | ) |                    |   | (3,176   | )
|Acquisition of NES Clothing Company, less cash acquired                                  |  |                                   |         |   |                    |   | (31,725  | )
|                                                                                         |  |                                   |          |   |                    |   |          |  
|Net cash used in investing activities                                                    |  |                                   | (3,742   | ) |                    |   | (34,901  | )
|                                                                                         |  |                                   |          |   |                    |   |          |  
|Cash flows from financing activities                                                     |  |                                   |          |   |                    |   |          |  
|Borrowings on revolving credit agreement                                                 |  |                                   | 369,400  |   |                    |   | 315,269  |  
|Repayments on revolving credit agreement                                                 |  |                                   | (308,000 | ) |                    |   | (306,169 | )
|Payments of principal on capital lease obligations, net                                  |  |                                   | (1,151   | ) |                    |   | (1,107   | )
|Issuance of common stock                                                                 |  |                                   |         |   |                    |   | 13,255   |  
|Payment of Kays seller note                                                             |  |                                   |         |   |                    |   | (150     | )
|Payment of deferred compensation arrangement                                             |  |                                   |         |   |                    |   | (939     | )
|Proceeds from payment of employee note receivable                                        |  |                                   |         |   |                    |   | 715      |  
|Change in book overdraft                                                                 |  |                                   | (30,197  | ) |                    |   | (19,555  | )
|                                                                                         |  |                                   |          |   |                    |   |          |  
|Net cash provided by financing activities                                                |  |                                   | 30,052   |   |                    |   | 1,319    |  
|                                                                                         |  |                                   |          |   |                    |   |          |  
|Net increase in cash                                                                     |  |                                   | 4,400    |   |                    |   | 2,337    |  
|Cash at beginning of period                                                              |  |                                   | 2,321    |   |                    |   | 3,175    |  
|                                                                                         |  |                                   |          |   |                    |   |          |  
|Cash at end of period                                                                    |  | $                                 | 6,721    |   |                    | $ | 5,512    |  
|                                                                                         |  |                                   |          |   |                    |   |          |  
|Supplemental disclosure of cash flow information                                         |  |                                   |          |   |                    |   |          |  
|Interest paid                                                                            |  | $                                 | 17,408   |   |                    | $ | 15,529   |  
|                                                                                         |  |                                   |          |   |                    |   |          |  
|Taxes paid, net of refunds                                                               |  | $                                 | 357      |   |                    | $ | 140      |  
|                                                                                         |  |                                   |          |   |                    |   |          |  
|Assets acquired as a result of capital lease obligations                                 |  | $                                 | 2,825    |   |                    | $ |         |  
|                                                                                         |  |                                   |          |   |                    |   |          |  



The accompanying notes
are an integral part of the consolidated financial statements.



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BRODER BROS., CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



1. The Company and Summary of Significant Accounting Policies



Description of the Company



Broder Bros., Co. together with its consolidated subsidiaries (the Company) is a national wholesale distributor of imprintable sportswear and
related products which include undecorated or blank T-shirts, sweatshirts, polo shirts, fleece, caps, bags and other imprintable accessories that are decorated by the Companys customers primarily for advertising and promotional
purposes. Products are sold to screen printers, embroiderers and advertising specialty companies through seventeen distribution centers strategically located throughout the United States. These customers decorate the Companys products with
corporate logos, brands and other promotional images, then sell the imprinted sportswear and accessories to a highly diversified range of end-customers, including Fortune 1000 companies, sporting venues, concert promoters, athletic leagues,
educational institutions and travel resorts.



In June 2003, the
Company completed the purchase of T-Shirts & More, Inc. (TSM) through an asset purchase agreement. In September 2003, the Company acquired all of the outstanding capital stock of Alpha Shirt Holdings, Inc. (Alpha),
pursuant to a stock purchase agreement. In August 2004, the Company acquired all of the shares of beneficial interest of NES, a leading distributor of imprintable sportswear in New England. Immediately after consummation of the acquisitions, Alpha
and its subsidiaries and NES and its subsidiary were merged with and into Broder Bros., Co., except for ASHI, Inc., which became a direct, wholly owned non-operating subsidiary of the Company until it also was subsequently merged with and into
Broder Bros., Co. in the second quarter of 2005.



The Company
operates on a 52/53-week year basis with the year ending on the last Saturday of December. The three and nine months ended September 24, 2005 and September 25, 2004 each consisted of thirteen and thirty nine weeks, respectively. Fiscal
periods are identified according to the calendar period that they most accurately represent. For example, the quarterly period ended September 24, 2005 is referred to herein as the three months ended September 30, 2005 and the
balance sheet dates of September 24, 2005 and December 25, 2004 are referred to herein as September 30, 2005 and December 31, 2004, respectively.



Basis of Presentation of Unaudited Interim Financial Information



The unaudited consolidated financial information herein has been prepared in
accordance with generally accepted accounting principles and is in accordance with the Securities and Exchange Commission (SEC) regulations for interim financial reporting. In the opinion of management, the financial statements include
all adjustments, consisting only of normal recurring adjustments, that are considered necessary for a fair statement of the Companys financial position, results of operations and cash flows for the interim periods. Operating results for the
three and nine months ended September 30, 2005 are not necessarily indicative of results that may be expected for the entire year. This financial information should be read in conjunction with the audited financial statements and notes thereto
for the year ended December 31, 2004 of the Company, which are included in the Form 10-K filed with the SEC on March 25, 2005.



Principles of Consolidation and Use of Estimates



The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. These assumptions also affect the reported amounts of revenue and
expenses during the reporting periods. Actual results could differ from those estimates and assumptions.



Inventory



Inventory is stated at the lower of cost or market using the first-in, first-out method. Inventory consists of finished goods held for sale. The
Companys reported inventory cost consists of the cost of product, net of vendor incentives related to unsold inventory, and certain costs incurred to bring inventory to its existing condition or location, including freight-in, purchasing,
receiving, inspection and other material handling costs. The Company maintains an allowance for potential losses on the disposal of its discontinued and slow moving inventory. Amounts due to the Company related to vendor incentives are recorded as
reductions to vendor payables.



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Stock options



Effective December 26, 2004 the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 123 (revised 2004), Share-Based Payment (SFAS No. 123R). SFAS No. 123R is a revision of SFAS No. 123, and its related implementation guidance. With the adoption of SFAS No. 123R, the Company is
required to record compensation expense on stock options granted to employees. In accordance with SFAS No. 123R, the Company has applied the prospective transition method, whereby it will continue to account for any portion of awards
outstanding at the date of transition using the accounting principles originally applied to those awards. Accordingly, upon adoption of SFAS No. 123R, there was no effect on income from continuing operations, income before income taxes, net
income, cash flow from operations, or cash flow from financing activities. During the period from adoption through September 24, 2005, there were no new awards, and no modifications, repurchases or cancellations of existing awards and no
compensation expense was recorded.



Income Taxes



The difference between the U.S. federal statutory rate of
34% and the effective rate relates primarily to the impact of state and local taxes and meals and entertainment.



New Accounting Pronouncements



In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 151, Inventory Costs an amendment of ARB
No. 43, Chapter 4 (SFAS No. 151). SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal
as to require treatment as current period charges. SFAS No. 151 requires that those items be recognized as current-period charges regardless of whether they meet the criterion of so abnormal. In addition, SFAS No. 151
requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of SFAS No. 151 shall be applied prospectively, effective for inventory costs
incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted. The Company is currently assessing the impact that SFAS No. 151 would have on its consolidated financial statements.



In December 2004, the FASB issued SFAS No. 153, Exchanges of
Nonmonetary Assets an amendment of APB Opinion No. 29 (SFAS No. 153). SFAS No. 153 addresses the measurement of exchanges of nonmonetary assets. It eliminates the exception from fair value measurement for nonmonetary
exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153
specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 shall be applied prospectively, effective for
nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted. The Company has not entered into nonmonetary exchanges; accordingly, it anticipates that SFAS No. 153 will not have a
material effect on its financial condition, results of operations or cash flows.



In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (FIN 47), an interpretation of SFAS No. 143, Accounting for
Asset Retirement Obligations. FIN 47 clarifies that an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. FIN 47 addresses
asset retirement obligations where an entity has a legal obligation to perform an asset retirement activity in which the timing and method of settling the obligation are conditional upon a future event that may or may not be within the entitys
control. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. This interpretation is effective no later than the end of fiscal years ending after
December 15, 2005. Earlier application is permitted . The Company is currently assessing the impact that FIN 47 would have on its consolidated financial statements.



In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, (SFAS
No. 154) which replaces Accounting Principles Board Opinion No. 20, Accounting Changes and SFAS No. 3 Reporting Accounting Changes in Interim Financial Statements and changes the requirements of the
accounting for and reporting of a change in accounting principle. SFAS No. 154 applies to all voluntary changes in accounting principles. SFAS No. 154 requires retrospective application to prior periods financial statements of
changes in accounting principle, unless it is impracticable to do so. SFAS No. 154 also requires that a change in depreciation, amortization or depletion method of long-lived, non-financial assets be accounted for as a change in accounting
estimate effected by a change in accounting principle. SFAS No. 154 will be effective for accounting changes and corrections of errors made during fiscal years beginning after December 15, 2005. This statement does not change the
transition positions of any existing accounting pronouncements, including those that



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are in a transition phase as of the effective date of this statement. The Company is currently assessing the impact that SFAS No. 154 would have on its
consolidated financial statements.



2. Acquisition



In August 2004, the Company acquired all of the shares of beneficial
interest of NES, a leading distributor of imprintable sportswear in New England. The primary benefit inherent in the NES acquisition was its strong market position in the New England region. The purchase price allocation of the acquisition of NES
was performed with the assistance of an independent appraisal firm to determine valuations of identifiable intangible assets. In accordance with SFAS No. 141, Business Combinations, the purchase price paid for NES was allocated
based on the fair value of tangible and intangible assets acquired and liabilities assumed.



The following table represents the allocation of the purchase price to assets acquired and liabilities assumed.



|                                       |  |                        |         |  
|-------------------------------------- |  | ---------------------- | ------- | -
|                                       |  | (dollars in thousands) |        
|Accounts receivable                    |  | $                      | 15,627  |  
|Finished goods inventory               |  |                        | 24,548  |  
|Other assets                           |  |                        | 1,263   |  
|Fixed assets                           |  |                        | 873     |  
|Customer relationships                 |  |                        | 7,580   |  
|Trademarks and trade names             |  |                        | 4,000   |  
|Accounts payable and other liabilities |  |                        | (18,086 | )
|Deferred taxes, net                    |  |                        | (4,080  | )
|                                       |  |                        |         |  
|Purchase Price                         |  | $                      | 31,725  |  
|                                       |  |                        |         |  



The unaudited pro
forma financial information presented below gives effect to the NES acquisition as if it occurred on January 1, 2004. The information presented below is for illustrative purposes only and is not indicative of results which would have been
achieved or may be achieved in the future.



|                       |  |                                      |         |                                     |   |         |  
|---------------------- |  | ------------------------------------ | ------- | ----------------------------------- | - | ------- | -
|                       |  | Three Months EndedSeptember 30, 2004 |         | Nine Months EndedSeptember 30, 2004 |  
|                       |  | (dollars in thousands)               |        
|Net sales              |  | $                                    | 253,860 |                                     | $ | 724,964 |  
|Gross profit           |  |                                      | 44,820  |                                     |   | 128,354 |  
|Income from operations |  |                                      | 10,154  |                                     |   | 20,423  |  
|Net income (loss)      |  |                                      | 915     |                                     |   | (2,695  | )



The results of
operations for this acquisition have been included in the consolidated financial statements since the date of acquisition.



3. Comprehensive Income (Loss)



|                                                                |  |                                  |        |                                |      |   |       |  |   |        |   |  |   |        |  
|--------------------------------------------------------------- |  | -------------------------------- | ------ | ------------------------------ | ---- | - | ----- |  | - | ------ | - |  | - | ------ | -
|                                                                |  | Three Months Ended September 30, |        | Nine Months EndedSeptember 30, |     
|                                                                |  | 2005                             |        |                                | 2004 |   | 2005  |  |   | 2004   |  
|                                                                |  | (dollars in thousands)           |       
|Net income (loss)                                               |  | $                                | (1,701 | )                              |      | $ | 1,705 |  | $ | (5,196 | ) |  | $ | (2,356 | )
|Amortization of FAS 133 transition adjustment, net of taxes (a) |  |                                  | 19     |                                |      |   | 33    |  |   | 57     |   |  |   | 100    |  
|                                                                |  |                                  |        |                                |      |   |       |  |   |        |   |  |   |        |  
|Comprehensive income (loss)                                     |  | $                                | (1,682 | )                              |      | $ | 1,738 |  | $ | (5,139 | ) |  | $ | (2,256 | )
|                                                                |  |                                  |        |                                |      |   |       |  |   |        |   |  |   |        |  

---

|(a) | Net of taxes of $10 and $17, respectively, for the three months ended September 30, 2005 and 2004 and net of taxes of $29 and $50, respectively, for the nine months ended
September 30, 2005 and 2004.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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4. Long-Term Debt and Capital Lease Obligations



Long-term debt and capital lease obligations consisted of the following:



|                                                                              |  |                        |         |                  |   |        
|----------------------------------------------------------------------------- |  | ---------------------- | ------- | ---------------- | - | -------
|                                                                              |  | September 30,2005      |         | December 31,2004
|                                                                              |  | (dollars in thousands)
|Revolving credit facility                                                     |  | $                      | 105,400 |                  | $ | 44,000 
|Senior notes                                                                  |  |                        | 225,000 |                  |   | 225,000
|Unamortized debt premium                                                      |  |                        | 1,281   |                  |   | 1,469  
|Capital lease obligations                                                     |  |                        | 2,628   |                  |   | 953    
|                                                                              |  |                        |         |                  |   |        
|                                                                              |  |                        | 334,309 |                  |   | 271,422
|Less: current portion                                                         |  |                        | 1,093   |                  |   | 748    
|                                                                              |  |                        |         |                  |   |        
|Total long-term debt and capital lease obligations, excluding current portion |  | $                      | 333,216 |                  | $ | 270,674
|                                                                              |  |                        |         |                  |   |        



Principal payments on
the revolving credit facility and capital lease obligations for the next five years ending September 30 are listed in the table below. The $225.0 million in senior notes are due in October 2010.



|     |  |                        |        
|---- |  | ---------------------- | -------
|     |  | (dollars in thousands)
|2006 |  | $                      | 1,093  
|2007 |  |                        | 867    
|2008 |  |                        | 105,917
|2009 |  |                        | 87     
|2010 |  |                        | 64     



Revolving Credit
Facility



In connection with the Alpha acquisition, the
Company retired its existing revolving credit facility and entered into an amended revolving credit facility. The amended revolving credit facility is available until September 2008 and provides for aggregate borrowings of up to $175.0 million,
subject to borrowing base limitations. In September 2005, the Company exercised its option to increase the revolving credit facility by $50.0 million for total borrowings of up to $225.0 million. The amended revolving credit facility is secured by
first priority pledges of all the equity interests owned by the Company in its domestic subsidiaries and 66% of all equity interests in any future foreign subsidiaries. The amended revolving credit facility is also secured by first priority
interests in, and mortgages on, substantially all tangible and intangible assets of the Company and each of its direct and indirect domestic subsidiaries. Availability under the amended revolving credit facility is based on a borrowing base
calculated using advance rates applied to eligible accounts receivable and eligible inventory. The revolving credit facility contains both affirmative and negative covenants which, among other things, may require the Company to meet certain
financial tests (including a minimum interest coverage ratio and minimum levels of EBITDA, as defined in the credit facility), and places limits upon capital expenditures, disposals of assets, mergers and acquisitions, further indebtedness,
transactions with affiliates and other customary restrictions. The occurrence of certain of these events may accelerate required repayment. As of September 30, 2005, the Company was in compliance with all covenants.



The revolver agreement provides for interest based upon a fixed spread above
the banks prime lending rate, or other rate options which are periodically fixed at a spread over the banks LIBOR lending rate. In addition, an unused credit facility fee ranging from 0.375% to 0.5% is charged quarterly on the average
daily unused portion of the facility. The unused credit facility fees were less than $0.1 million and were approximately $0.2 million for the three and nine months ended September 30, 2005, respectively. The effective interest rate at
September 30, 2005 was 6.1% and the weighted average interest rate on the amended revolving credit facility for the nine months ended September 30, 2005 was 5.4%. As of September 30, 2005, outstanding borrowings on the revolving
credit facility were $105.4 million, which left $98.0 million of available borrowing capacity as determined by borrowing base availability. The effective interest rate at December 31, 2004 was 6.2%. As of December 31, 2004, outstanding
borrowings on the revolving credit facility were $44.0 million, which left $105.1 million of available borrowing capacity as determined by borrowing base availability.



Deferred financing fees related to the revolving credit facility of $7.3 million are being amortized on a straight-line
basis over the life of the facility.



The revolving credit
facility also contains a provision for up to $25.0 million of letters of credit, subject to borrowing base availability and total amounts outstanding under the revolving credit agreement of $225.0 million.



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As of September 30, 2005 and December 31, 2004, the Company had approximately $10.5 million and $11.5 million, respectively, of outstanding letters
of credit primarily related to commitments for the purchase of inventory.



Senior Notes



In
November 2004, the Company entered into a purchase agreement (the Purchase Agreement) with an initial purchaser regarding the private placement of $50.0 million aggregate principal amount of its 111/4% Senior Notes due 2010 (the Notes) to qualified institutional buyers under Rule 144A and to persons outside the United States
under Regulation S. The Notes were issued at 103% of aggregate principal amount. In November 2004, the Company issued the Notes and received net proceeds of approximately $49.0 million, after deducting estimated fees and expenses related to the
offering. The Company used such net proceeds to repay a portion of the outstanding borrowings under its revolving credit facility. On May 2, 2005, the Notes were the subject of an exchange offer that was registered with the SEC (File
No. 333-123991).



The Notes are general unsecured senior
obligations of the Company and are guaranteed by the Companys domestic subsidiary. Interest is payable on April 15 and October 15 of each year beginning April 15, 2005 until the maturity date of October 15, 2010. The
Company may redeem up to 35% of the Notes before October 15, 2006, using the proceeds of certain equity offerings. The Company is required to repurchase the Notes if it sells all or substantially all of its assets or experiences specific kinds
of changes in control.



The Notes are additional debt
securities issued under an indenture dated September 22, 2003 (the Indenture), between the Company, the Guarantors named therein and Wachovia Bank, National Association, as Trustee, under which the Company previously issued $175.0
million aggregate principal amount of 111/4% Senior Notes due 2010 (the Initial Notes).



In September 2003, in connection with the Alpha acquisition,
the Company completed a private offering of $175.0 million 111/4% Senior Notes due October 15, 2010. The
proceeds of the private offering were used to finance the Alpha acquisition, repay existing indebtedness of the Company and Alpha, and to pay related fees and expenses. The Senior Notes are guaranteed on a senior unsecured basis by all existing and
future material domestic subsidiaries, and pay interest semi-annually in arrears on April 15 and October 15 of each year. The indenture governing the Senior Notes contains customary affirmative and negative covenants which, among other
things, limit the Companys ability to incur additional indebtedness, pay dividends, merge or consolidate, or otherwise sell or dispose of substantially all of the Companys assets. The occurrence of certain of these events may accelerate
required repayment of the notes.



Interest Rate Swaps



As a condition of its Revolving Credit Facility, the
Company was required to enter into interest rate protection agreements (swaps). The Company does not use derivatives for speculative purposes.



The Company had outstanding interest rate swap agreements with a commercial bank as follows:



|                      |  |                        |        |                  |   |       
|--------------------- |  | ---------------------- | ------ | ---------------- | - | ------
|                      |  | Notional Amounts      
|                      |  | September 30,2005      |        | December 31,2004
|                      |  | (dollars in thousands)
|MaturityMay 2005     |  | $                      |       |                  | $ | 20,000
|MaturityOctober 2008 |  |                        | 10,000 |                  |   | 10,000
|                      |  |                        |        |                  |   |       
|                      |  | $                      | 10,000 |                  | $ | 30,000
|                      |  |                        |        |                  |   |       



The Company is exposed
to credit loss in the event of nonperformance by the counter party. The Company does not anticipate nonperformance to be likely. The Company has elected to not apply hedge accounting for these swap agreements. The fair value of these interest rate
swaps approximated $(0.8) million and $(1.6) million at September 30, 2005 and December 31, 2004, respectively. This decrease in negative value during the nine months ended September 30, 2005 has been recognized in earnings. In
addition, approximately $57,000 and $0.1 million, net of tax, of the initial transition adjustment was reclassified to earnings during the nine months ended September 30, 2005 and 2004, respectively. The Company expects to reclassify less than
$0.1 million, net of tax, during the next 12 months. The swaps are classified on the consolidated balance sheets based on the expected timing of the cash flows related to the swaps. Approximately $0.4 million of the swap liability was classified as
accrued expenses at December 31, 2004, while there was no short term liability at September 30, 2005. Approximately $0.8 million and $1.2 million were classified as other long-term liabilities at September 30, 2005 and
December 31, 2004, respectively.



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Redeemable Securities



Certain key executives of the Company hold common shares, including shares of common stock sold by Bain Capital to certain
executives, that may be put to the Company at their then fair market value if the executive terminates for any reason other than for cause or without good reason. Net of the related executive note receivable of approximately $0.4 million, the value
of the redeemable securities was approximately $2.0 million and $2.3 million as of September 30, 2005 and December 31, 2004, respectively.



These redeemable securities were recorded as other long-term liabilities on the consolidated balance sheet at September 30, 2005 in accordance with
SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.



During the nine months ended September 30, 2005 and 2004, certain executives experienced triggering events which resulted in increases to additional
paid-in capital of approximately $0.3 million in each period due to the redemption of their shares by Bain Capital. Redemption was considered to be uncertain for all other such redeemable securities as of September 30, 2005 and
December 31, 2004 based on the fact that a triggering event has not occurred leading to an executives termination for any other reason than for cause or without good reason.



These shares, net of the related note receivable, have been recorded on the consolidated balance sheets at each of the
following dates:



|                   |  |                        |  |                         |     |                          |   |                      |  |   |        
|------------------ |  | ---------------------- |  | ----------------------- | --- | ------------------------ | - | -------------------- |  | - | -------
|                   |  | Numberof Shares        |  | CommonStock atPar Value |     | AdditionalPaid-inCapital |   | LiquidatedPreference
|                   |  | (dollars in thousands)
|September 30, 2005 |  |                        |  |                         |     |                          |   |                      |  |   |        
|Class A            |  | 515,859                |  | $                       | 5.2 |                          | $ | 95                   |  | $ |       
|Class B            |  | 380,834                |  |                         | 3.8 |                          |   | 76                   |  |   |       
|Class L, Series 1  |  | 36,363                 |  |                         | 0.4 |                          |   | 572                  |  |   | 1,112.3
|Class L, Series 2  |  | 35,156                 |  |                         | 0.4 |                          |   | 553                  |  |   | 798.7  
|Class L, Series 3  |  | 36,935                 |  |                         | 0.4 |                          |   | 627                  |  |   | 1,129.8
|Class L, Series 4  |  | 35,707                 |  |                         | 0.4 |                          |   | 527                  |  |   | 811.3  
|December 31, 2004  |  |                        |  |                         |     |                          |   |                      |  |   |        
|Class A            |  | 515,859                |  | $                       | 5.2 |                          | $ | 95                   |  | $ |       
|Class B            |  | 453,169                |  |                         | 4.5 |                          |   | 92                   |  |   |       
|Class L, Series 1  |  | 36,363                 |  |                         | 0.4 |                          |   | 572                  |  |   | 1,015.3
|Class L, Series 2  |  | 35,156                 |  |                         | 0.4 |                          |   | 553                  |  |   | 690.5  
|Class L, Series 3  |  | 43,950                 |  |                         | 0.4 |                          |   | 757                  |  |   | 1,227.1
|Class L, Series 4  |  | 42,490                 |  |                         | 0.4 |                          |   | 636                  |  |   | 834.5  



5. Related Party Transactions



In May 2000, the Company entered into an Advisory
Services Agreement with Bain Capital, Inc. pursuant to the Merger Agreement and Recapitalization of the Company. The Advisory Services Agreement required the Company to pay a quarterly advisory fee of approximately $0.2 million for a ten year
period. In an event of a change of control or Initial Public Offering prior to the completion of the ten year period, Bain Capital would have received a lump sum payment equivalent to three years of advisory fees. The agreement also required the
Company to pay investment banking fees in the amount of 1% of certain prescribed transactions, part of which could have been used to offset the quarterly advisory fee otherwise due.



In connection with the acquisition of Alpha in September 2003, the Advisory Services Agreement was cancelled and replaced by
a discretionary, contingency-based agreement, subject to certain limitations set forth therein. Under the amended and restated Advisory Services Agreement, for the first two full fiscal years following the acquisition and related equity investment
by Bain Capital, Bain Capital may be paid a management fee for strategic, financial and other advisory services up to an annual maximum of $1.5 million at the discretion of the Companys board of directors. The amended and restated Advisory
Services Agreement states that in the event Bain Capital were to receive a fee for fiscal 2004, Bain Capital would also receive a pro rata portion of such fee for the period from the closing of the acquisition through December 31, 2003. At
December 31, 2004 approximately $1.9 million of management fees payable to Bain Capital were reported in accrued expenses. These management fees consisted of a fee of $0.4 million for fiscal 2003, as a pro rata portion of such fee for the
period from the closing of the acquisition through December 31, 2003 and, a fee of $1.5 million for fiscal 2004. These $1.9 million of fees were paid by the Company during the three months ended March 31, 2005. During the nine months ended



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September 30, 2005, the Company recorded management fee expense of approximately $1.1 million, which is included in accrued expenses.



For each full fiscal year beginning in fiscal 2006, Bain Capital may be paid
a fee up to an annual maximum of $3.0 million at the discretion of the Companys board of directors. Before any such management fees may be paid, EBITDA, as defined in the amended and restated Advisory Services Agreement, after giving effect to
payment of the management fee, must be greater than $52.0 million in order for Bain Capital to earn a fee. Except as described in this paragraph, the new Advisory Services Agreement is substantially identical to the prior advisory services
agreement. The Company believes that the terms of such advisory services agreement with Bain Capital are no less favorable than those that could have been obtained pursuant to a similar agreement with an unrelated third party.



Bain Capital was paid fees of approximately $0.4 million upon the completion
of the NES acquisition in August 2004, and $0.5 million upon completion of the private placement of $50.0 million aggregate principal amount of the Companys 111/4% senior notes offering in November 2004.



In connection with a recapitalization of the Company and ensuing change in ownership following the May 2000 investment by affiliates of Bain Capital,
Inc., the Company loaned an officer $1.0 million as a note receivable with interest at the annual short-term federal rate compounded annually. The note is due May 3, 2007. As security, the officer has pledged shares of the Company. The Company
also entered into a non-contingent deferred compensation agreement with the same officer for $1.0 million also payable in 2007. The deferred compensation agreement was settled for its full value when the officer repaid a $0.7 million note payable to
the Company during the three months ended June 30, 2004. The transactions had no net impact on cash flows of the Company, but resulted in the recognition of an approximate $0.2 million loss on the early retirement of the deferred compensation
obligation. At September 30, 2005 and December 31, 2004, approximately $0.4 million of the note receivable including interest was outstanding and was included in redeemable securities, net of employee note receivable on the consolidated
balance sheet.



6. Commitments and Contingencies



Self-Insured Health Plan



The Company maintains various medical plans for its employees, including a
self-insured health plan. The Company has purchased stop loss insurance to supplement the self-insured health plan, which will reimburse the Company for individual claims in excess of $0.1 million annually or aggregate claims exceeding approximately
$2.5 million. At September 30, 2005 and December 31, 2004, approximately $0.6 million was included in accrued liabilities for self-insured health plan costs.



Litigation



The Company is a party to various lawsuits arising out of the normal conduct of its business, none of which, individually or in the aggregate, are
expected to have a material adverse effect on the Companys results of operations or financial position.



Employment Agreements



The Company has entered into employment agreements with certain employees, which provide that the employee will not compete in the wholesale distribution of imprintable sportswear and accessories business for a specified period after their
respective termination dates. The employment agreements also define employment terms including salary, bonus and benefits to be provided to the respective employees.



Advisory Agreement



In connection with the acquisition of Alpha, the Company entered into an amended and restated Advisory Services Agreement with Bain Capital in September
2003. See Note 5.



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7. Segment Information



In accordance with SFAS No. 131, Disclosure About Segments of an Enterprise and Related Information, the Companys principal
operating segments are grouped into three business units: the Broder division, the Alpha division, and with the August 2004 acquisition of NES, the NES division. Operating segments are defined as components of the business for which separate
information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. While management expects these segments to exhibit similar long-term financial performance
because they have similar economic characteristics, the nature of each divisions products is similar, the type of customer is similar and the method used to distribute their products is similar, the Company has determined that it had three
operating segments as of September 30, 2005 and December 31, 2004 because a comprehensive integration of NES had not occurred. Until such time as a comprehensive integration of NES has occurred, the Company intends to separately identify
and manage certain key elements of each division. The following table presents information used by the Companys chief operating decision makers in deciding how to allocate resources and in assessing performance.



Statement of Operations Information



|              |  |                                  |         |       |   |         |  |              |        |        |   |         |  |     |         |              |   |         |  |   |       |  |   |        
|------------- |  | -------------------------------- | ------- | ----- | - | ------- |  | ------------ | ------ | ------ | - | ------- |  | --- | ------- | ------------ | - | ------- |  | - | ----- |  | - | -------
|              |  | Three Months Ended September 30,
|              |  | 2005                             |         | 2004 
|              |  | Broder                           |         | Alpha |   | NES     |  | Consolidated |        | Broder |   | Alpha   |  | NES |         | Consolidated
|              |  | (dollars in thousands)          
|Net sales     |  | $                                | 100,400 |       | $ | 121,742 |  | $            | 33,477 |        | $ | 255,619 |  | $   | 104,803 |              | $ | 117,344 |  | $ | 9,158 |  | $ | 231,305
|Cost of sales |  |                                  | 84,003  |       |   | 99,891  |  |              | 27,547 |        |   | 211,441 |  |     | 86,734  |              |   | 96,460  |  |   | 7,625 |  |   | 190,819
|              |  |                                  |         |       |   |         |  |              |        |        |   |         |  |     |         |              |   |         |  |   |       |  |   |        
|Gross profit  |  | $                                | 16,397  |       | $ | 21,851  |  | $            | 5,930  |        | $ | 44,178  |  | $   | 18,069  |              | $ | 20,884  |  | $ | 1,533 |  | $ | 40,486 
|              |  |                                  |         |       |   |         |  |              |        |        |   |         |  |     |         |              |   |         |  |   |       |  |   |        



|              |  |                                 |         |       |   |         |  |              |        |        |   |         |  |     |         |              |   |         |  |   |       |  |   |        
|------------- |  | ------------------------------- | ------- | ----- | - | ------- |  | ------------ | ------ | ------ | - | ------- |  | --- | ------- | ------------ | - | ------- |  | - | ----- |  | - | -------
|              |  | Nine Months Ended September 30,
|              |  | 2005                            |         | 2004 
|              |  | Broder                          |         | Alpha |   | NES     |  | Consolidated |        | Broder |   | Alpha   |  | NES |         | Consolidated
|Net sales     |  | $                               | 273,457 |       | $ | 347,106 |  | $            | 94,853 |        | $ | 715,416 |  | $   | 288,644 |              | $ | 337,561 |  | $ | 9,158 |  | $ | 635,363
|Cost of sales |  |                                 | 228,596 |       |   | 280,261 |  |              | 77,480 |        |   | 586,337 |  |     | 241,045 |              |   | 274,297 |  |   | 7,625 |  |   | 522,967
|              |  |                                 |         |       |   |         |  |              |        |        |   |         |  |     |         |              |   |         |  |   |       |  |   |        
|Gross profit  |  | $                               | 44,861  |       | $ | 66,845  |  | $            | 17,373 |        | $ | 129,079 |  | $   | 47,599  |              | $ | 63,264  |  | $ | 1,533 |  | $ | 112,396
|              |  |                                 |         |       |   |         |  |              |        |        |   |         |  |     |         |              |   |         |  |   |       |  |   |        



Balance Sheet Information



|                                                        |  |                        |        |       |   |         |  |              |        |  |   |        
|------------------------------------------------------- |  | ---------------------- | ------ | ----- | - | ------- |  | ------------ | ------ |  | - | -------
|                                                        |  | Broder                 |        | Alpha |   | NES     |  | Consolidated
|                                                        |  | (dollars in thousands)
|As of September 30, 2005                                |  |                        |        |       |   |         |  |              |        |  |   |        
|Accounts receivable, net                                |  | $                      | 39,940 |       | $ | 48,420  |  | $            | 14,782 |  | $ | 103,142
|Finished goods inventory                                |  |                        | 88,006 |       |   | 115,419 |  |              | 26,979 |  |   | 230,404
|Fixed assets, net                                       |  |                        | 7,297  |       |   | 7,905   |  |              | 795    |  |   | 15,997 
|Goodwill, intangible assets and deferred financing fees |  |                        | 26,363 |       |   | 190,348 |  |              | 8,561  |  |   | 225,272
|Accounts payable                                        |  |                        | 53,012 |       |   | 52,630  |  |              | 15,049 |  |   | 120,691
|                                                        |  |                        |        |      
|As of December 31, 2004                                 |  |                        |        |       |   |         |  |              |        |  |   |        
|Accounts receivable, net                                |  | $                      | 31,805 |       | $ | 42,062  |  | $            | 13,822 |  | $ | 87,689 
|Finished goods inventory                                |  |                        | 70,552 |       |   | 72,007  |  |              | 32,230 |  |   | 174,789
|Fixed assets, net                                       |  |                        | 7,193  |       |   | 6,497   |  |              | 880    |  |   | 14,570 
|Goodwill, intangible assets and deferred financing fees |  |                        | 28,303 |       |   | 198,723 |  |              | 10,608 |  |   | 237,634
|Accounts payable                                        |  |                        | 45,622 |       |   | 43,130  |  |              | 26,684 |  |   | 115,436



8. Restructuring and Asset
Impairment Charges



Following the September 2003
acquisition of Alpha, the Company changed its inventory replenishment strategy and began the initiative to consolidate corporate headquarters of the combined Company. As a result, the Company effected a restructuring and asset impairment plan (the
2003 Plan) designed to reduce its cost structure by closing two distribution centers, disposing of the related fixed assets and reducing its workforce.



During the fourth quarter of 2003 and in fiscal 2004, the Company recorded a total of $10.8 million in restructuring charges
under the 2003 Plan in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, on the Companys Broder division. These charges consisted of (i) approximately $7.0 million in
distribution center closure costs, which included the fair value of the future lease obligations as of the cease-use date, net of expected



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sub-lease rentals; (ii) approximately $3.0 million in cash severance and related benefits for distribution center and corporate office staff reductions;
and (iii) $0.9 million in non-cash fixed asset impairment charges related to the disposal of distribution center fixed assets. The distribution centers were closed during the fourth quarter of 2003. The Company does not expect to incur any
future restructuring charges related to the 2003 Plan. The Company made the remaining severance payments related to corporate employees through the second quarter of 2005 due to planned corporate employee termination dates. The future lease
obligation is expected to be paid over the remaining lease term, which expires in March 2014.



During the year ended December 31, 2004, the Company recorded a non-cash fixed asset impairment charge of approximately $0.8 million for the disposal of computer software that the Company had determined it would
not continue to use as a result of the completion of the second of four stages of its information systems integration plan related to the merger of Broder and Alpha. The second stage of the information systems integration plan occurred during the
three months ended June 30, 2004 and combined the purchasing, forecasting, inventory control and inventory costing systems onto a single platform.



During the year ended December 31, 2004, the Companys Broder division also recorded approximately $0.8 million in lease termination and other
costs for the fair value of future lease obligations related to the closure of its Cleveland, Ohio distribution center. The future lease obligation is expected to be paid over the remaining lease term, which expires in May 2007. During the quarter
ended March 31, 2005, the Companys Broder division recorded approximately $0.5 million in lease termination and other costs for the fair value of future lease obligations related to the closure of its Charlotte, North Carolina
distribution center. The future lease obligation is expected to be paid over the remaining lease term, which expires in April 2007. During the quarter ended September 30, 2005, the Companys Broder division recorded approximately $0.9
million in distribution center closure costs, consisting of the fair value of the future lease obligations, net of expected sublease rentals, of approximately $0.6 million, and approximately $0.3 million in non-cash fixed asset impairment charges
related to the disposal of distribution center fixed assets. The future lease obligation is expected to be paid over the remaining lease term, which expires in December 2009.



The Companys NES division recorded a $0.2 million restructuring charge during 2004 and an additional $0.5 million in
restructuring charges during the nine months ended September 30, 2005. These charges consisted of severance related payments for NES corporate staff reductions resulting from the integration of NES into the Company. The Company expects to incur
a total of approximately $0.8 million in cash severance and related benefits in connection with the NES workforce reduction. The majority of severance payments will be paid within the next twelve months due to NES corporate staff termination dates.



Restructuring activity is summarized as follows:



|                                   |  |                            |       |                     |   |              |  |   |                                  |   |  |                             |      |   |  |   |      
|---------------------------------- |  | -------------------------- | ----- | ------------------- | - | ------------ |  | - | -------------------------------- | - |  | --------------------------- | ---- | - |  | - | -----
|                                   |  | Balance atDecember 31,2004 |       | RestructuringCharge |   | CashPayments |  |   | Non-CashItemsExpensedImmediately |   |  | Balance atSeptember 30,2005
|                                   |  | (dollars in thousands)    
|Distribution center closure costs  |  |                            |       |                     |   |              |  |   |                                  |   |  |                             |      |   |  |   |      
|Lease termination and other costs  |  | $                          | 7,089 |                     | $ | 1,017        |  | $ | (1,021                           | ) |  | $                           |     |   |  | $ | 7,085
|Severance and related benefits     |  |                            |      |                     |   | 17           |  |   | (17                              | ) |  |                             |     |   |  |   |     
|Non-cash asset write-offs          |  |                            |      |                     |   | 401          |  |   |                                 |   |  |                             | (401 | ) |  |   |     
|Corporate workforce reduction      |  |                            |       |                     |   |              |  |   |                                  |   |  |                             |      |   |  |   |      
|Severance and related benefits     |  |                            | 697   |                     |   |             |  |   | (697                             | ) |  |                             |     |   |  |   |     
|NES severance and related benefits |  |                            | 233   |                     |   | 533          |  |   | (291                             | ) |  |                             |     |   |  |   | 475  
|                                   |  |                            |       |                     |   |              |  |   |                                  |   |  |                             |      |   |  |   |      
|                                   |  | $                          | 8,019 |                     | $ | 1,968        |  | $ | (2,026                           | ) |  | $                           | (401 | ) |  | $ | 7,560
|                                   |  |                            |       |                     |   |              |  |   |                                  |   |  |                             |      |   |  |   |      



The total of
approximately $7.6 million in accrued restructuring is recorded as $2.1 million in current liabilities and $5.5 million in long-term liabilities at September 30, 2005.



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|Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



GENERAL



We are a leading distributor of imprintable sportswear and accessories in the United States. Imprintable sportswear and accessories is an estimated $8
billion U.S. market in wholesale revenues and includes undecorated or blank T-shirts, sweatshirts, polo shirts, fleece, outerwear, caps, bags and other imprintable accessories that are decorated primarily for advertising and promotional
purposes. We source product from more than 45 suppliers, including Russell, Fruit of the Loom, Hanes, Anvil and Gildan. Other exclusive or near-exclusive suppliers include retail brands such as Adidas Golf, Columbia Sportswear,
Weatherproof and Champion. We consider the term near-exclusive to represent those arrangements where, although not contractually entitled to exclusivity, we believe we are the only distributor to offer these products in an
annual catalog to the imprintable sportswear industry. In addition to our distribution suppliers, we develop and source products from over 16 countries to support our private label brand initiatives, which include the brandsDevon &
Jones, HYP, Authentic Pigment, Desert Wash and Harvard Square, as well as the recently launched Chestnut Hill, Great Republic, Apples & Oranges and Harriton. Our products are sold to over 70,000
customers, primarily advertising specialty companies, screen printers, embroiderers and specialty retailers who decorate our blank product with corporate logos, brands and other promotional images. Our decorator customers then sell imprinted
sportswear and accessories to a highly diversified range of end-consumers, including Fortune 1000 companies, sporting venues, concert promoters, athletic leagues, educational institutions and travel resorts. We believe our end-consumers are
increasingly recognizing imprintable sportswear and accessories as highly differentiated, cost-effective advertising and promotional tools that help them grow their respective businesses and brand images. As a result, imprintable sportswear unit
volume has grown significantly over the last ten years, increasing at a compound annual growth rate of approximately 7%.



Alpha Acquisition



In September 2003, we acquired all of the outstanding capital stock of Alpha pursuant to a stock purchase agreement entered into in July 2003. Immediately
after consummation of the acquisition, Alpha and its subsidiaries were merged with and into Broder Bros., Co., except for ASHI, Inc., which became a direct, wholly owned subsidiary of the Company until it also was subsequently merged with and into
Broder Bros., Co. on March 28, 2005. The total cash consideration in the acquisition was $247.8 million. The aggregate cash costs of the acquisition, together with the funds necessary to refinance certain existing indebtedness and pay the
related fees and expenses, were financed by $76.0 million of new equity contributed by Bain Capital, management and other investors; borrowings of $92.0 million under a $175.0 million revolving credit facility; and net proceeds from the issuance and
sale of $175.0 million of 111/4% senior notes due 2010.



NES Acquisition



In August 2004, we acquired all the shares of beneficial interest of NES Clothing Company Holdings Trust (NES),
a leading distributor of imprintable sportswear in New England. The purchase price was approximately $31.7 million, subject to adjustment, which included payment of consideration to NES shareholders, retirement of all NES indebtedness and payment of
transaction fees. We funded the acquisition with $12.4 million of new equity invested by Bain Capital and $19.3 million of borrowings using available capacity under our revolving credit facility. For simplicity and efficiency purposes, NES and its
subsidiary were merged with and into Broder Bros., Co. As a result of such merger, NESs and its subsidiarys corporate existences were terminated.



Potential Acquisition-Related Cost Savings



We believe that the primary benefits from the acquisitions of Alpha and NES include greater scale, broader product offering, extended national presence,
regional market share strength and differentiated customer selling support. In addition, in connection with the Alpha and NES acquisitions, we identified cost reduction opportunities in redundant selling, general and administrative functions and
overlapping distribution points. Upon commencement of the Alpha acquisition, we developed a plan to pursue these opportunities, which upon completion was initially estimated to generate $7.9 million of annual savings. As of the end of fiscal 2004,
the Alpha integration was completed and expected annual run rate cost savings are $2.9 million in excess of the original estimate. Total annualized savings for the Alpha integration of $10.8 million consist of redundant selling, general and
administrative positions and rationalization of distribution facilities of $4.5 million and $6.3 million, respectively. In addition, in connection with the NES acquisition, we expect to generate $1.6 million of annual savings, consisting of $1.2
million of redundant selling, general and administrative positions and $0.4 million due to the rationalization of our Broder Charlotte, North Carolina distribution facility which was closed in March 2005. As of September 30, 2005, integration
activities related to the NES acquisition are substantially complete. We cannot assure you,



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however, that we will achieve any expected cost savings that have not been realized to date. The current status and updated expectations relative to the
Alpha and NES integration activities are summarized as follows:



|                                                        |  |                                            |      |                                                               |   |                                |  |                                                                                             |      |  |   |     |  |   |    
|------------------------------------------------------- |  | ------------------------------------------ | ---- | ------------------------------------------------------------- | - | ------------------------------ |  | ------------------------------------------------------------------------------------------- | ---- |  | - | --- |  | - | ---
|                                                        |  | Cost Savings                               |      | ExpectedFutureSavings Not Yet Reflected in Historical Results
|                                                        |  | AnnualizedSavings forCompleted Initiatives |      | AnnualizedSavings forInitiativesStill inProcess               |   | TotalExpectedAnnualizedSavings |  | Year Over YearSavingsReflected inOperatingResults for theNine
MonthsEnded September 30,2005 |     
|                                                        |  | (dollars in millions)                     
|Alpha Acquisition                                       |  |                                            |      |                                                               |   |                                |  |                                                                                             |      |  |   |     |  |   |    
|Redundant selling, general and administrative positions |  | $                                          | 4.5  |                                                               | $ |                               |  | $                                                                                           | 4.5  |  | $ | 1.4 |  | $ | 0.3
|Rationalization of distribution facilities              |  |                                            | 6.3  |                                                               |   |                               |  |                                                                                             | 6.3  |  |   | 0.6 |  |   | 0.1
|                                                        |  |                                            |      |                                                               |   |                                |  |                                                                                             |      |  |   |     |  |   |    
|Total Alpha Acquisition                                 |  |                                            | 10.8 |                                                               |   |                               |  |                                                                                             | 10.8 |  |   | 2.0 |  |   | 0.4
|                                                        |  |                                            |      |                                                               |   |                                |  |                                                                                             |      |  |   |     |  |   |    
|NES Acquisition                                         |  |                                            |      |                                                               |   |                                |  |                                                                                             |      |  |   |     |  |   |    
|Redundant selling, general and administrative positions |  |                                            | 1.2  |                                                               |   |                               |  |                                                                                             | 1.2  |  |   | 0.4 |  |   | 0.8
|Rationalization of distribution facilities              |  |                                            | 0.4  |                                                               |   |                               |  |                                                                                             | 0.4  |  |   | 0.2 |  |   | 0.2
|                                                        |  |                                            |      |                                                               |   |                                |  |                                                                                             |      |  |   |     |  |   |    
|Total NES acquisition                                   |  |                                            | 1.6  |                                                               |   |                               |  |                                                                                             | 1.6  |  |   | 0.6 |  |   | 1.0
|                                                        |  |                                            |      |                                                               |   |                                |  |                                                                                             |      |  |   |     |  |   |    
|Combined for the acquisitions                           |  | $                                          | 12.4 |                                                               | $ |                               |  | $                                                                                           | 12.4 |  | $ | 2.6 |  | $ | 1.4
|                                                        |  |                                            |      |                                                               |   |                                |  |                                                                                             |      |  |   |     |  |   |    



All cost savings
related to the integrations of Alpha and NES are gross amounts and do not reflect unrelated increases in operating expenses related to private label initiatives, organic growth, volume and other activities as discussed throughout this document.



Elimination of Quotas on Apparel Imports from China



On January 1, 2005 quotas on textile and apparel imports from China and
other countries were eliminated. The elimination of these quotas has not had a material adverse impact on our business. The elimination of these quotas was anticipated and our trade brand suppliers have been proactive in developing efficient and
competitive cost models. The commodity products we purchase from our trade brand suppliers have a relatively low labor component, which minimizes the low cost labor advantage of Chinese manufacturers. Additionally, our trade brand suppliers have
efficiently located manufacturing facilities in Central America and the Caribbean basin which create advantages in the form of shorter lead times and lower freight costs.



We source certain of our lower volume, higher margin private label products from manufacturers in China, and expect to
continue to take advantage of Chinese imports when it is efficient to do so. Due to longer lead times from manufacture to delivery, and the lack of any large North American warehouse storage and systems for replenishment of our inventories, we
believe there are currently no Chinese manufacturers capable of meeting our needs for high volume commodity products.



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Results of Operations



The following table sets forth the amounts and the percentages of net sales that items in the consolidated statements of operations constitute for the
periods indicated:



|                                                  |  |                                  |       |   |      |       |    |                     |   |       |                                 |       |   |      |   |      |                     |  |         |    |  |   |       |   |  |       |    |  |   |       |   |  |       |    |  |   |      |   |  |         |   
|------------------------------------------------- |  | -------------------------------- | ----- | - | ---- | ----- | -- | ------------------- | - | ----- | ------------------------------- | ----- | - | ---- | - | ---- | ------------------- |  | ------- | -- |  | - | ----- | - |  | ----- | -- |  | - | ----- | - |  | ----- | -- |  | - | ---- | - |  | ------- | --
|                                                  |  | Three Months Ended September 30, |       |   |      |       |    |                     |   |       | Nine Months Ended September 30, |       |   |      |   |      |                     | 
|                                                  |  | 2005                             |       |   | 2004 |       |    | Increase (Decrease) |   |       | 2005                            |       |   | 2004 |   |      | Increase (Decrease) | 
|                                                  |  | (dollars in millions)            |      
|Net Sales                                         |  | $                                | 255.6 |   |      | 100.0 | %  |                     | $ | 231.3 |                                 | 100.0 | % |      | $ | 24.3 |                     |  | 10.5    | %  |  | $ | 715.4 |   |  | 100.0 | %  |  | $ | 635.4 |   |  | 100.0 | %  |  | $ | 80.1 |   |  | 12.6    | % 
|Cost of sales                                     |  |                                  | 211.4 |   |      | 82.7  |    |                     |   | 190.8 |                                 | 82.5  |   |      |   | 20.6 |                     |  | 10.8    |    |  |   | 586.3 |   |  | 82.0  |    |  |   | 523.0 |   |  | 82.3  |    |  |   | 63.4 |   |  | 12.1    |   
|                                                  |  |                                  |       |   |      |       |    |                     |   |       |                                 |       |   |      |   |      |                     |  |         |    |  |   |       |   |  |       |    |  |   |       |   |  |       |    |  |   |      |   |  |         |   
|Gross profit                                      |  |                                  | 44.2  |   |      | 17.3  |    |                     |   | 40.5  |                                 | 17.5  |   |      |   | 3.7  |                     |  | 9.1     |    |  |   | 129.1 |   |  | 18.0  |    |  |   | 112.4 |   |  | 17.7  |    |  |   | 16.7 |   |  | 14.8    |   
|Warehousing, selling, and administrative expenses |  |                                  | 30.7  |   |      | 12.0  |    |                     |   | 25.6  |                                 | 11.1  |   |      |   | 5.0  |                     |  | 19.7    |    |  |   | 93.4  |   |  | 13.1  |    |  |   | 77.9  |   |  | 12.3  |    |  |   | 15.5 |   |  | 19.8    |   
|Depreciation and amortization                     |  |                                  | 4.8   |   |      | 1.9   |    |                     |   | 4.8   |                                 | 2.1   |   |      |   |     |                     |  |        |    |  |   | 14.8  |   |  | 2.1   |    |  |   | 14.5  |   |  | 2.3   |    |  |   | 0.2  |   |  | 1.7     |   
|Restructuring and asset impairment charges        |  |                                  | 0.9   |   |      | 0.4   |    |                     |   | 0.2   |                                 | 0.1   |   |      |   | 0.7  |                     |  | 100.0+  |    |  |   | 2.0   |   |  | 0.3   |    |  |   | 2.5   |   |  | 0.4   |    |  |   | (0.5 | ) |  | (19.8   | ) 
|                                                  |  |                                  |       |   |      |       |    |                     |   |       |                                 |       |   |      |   |      |                     |  |         |    |  |   |       |   |  |       |    |  |   |       |   |  |       |    |  |   |      |   |  |         |   
|Income from operations                            |  |                                  | 7.8   |   |      | 3.1   |    |                     |   | 9.9   |                                 | 4.3   |   |      |   | (2.1 | )                   |  | (21.0   | )  |  |   | 18.9  |   |  | 2.6   |    |  |   | 17.5  |   |  | 2.8   |    |  |   | 1.5  |   |  | 8.4     |   
|Interest expense, net                             |  |                                  | 9.4   |   |      | 3.7   |    |                     |   | 7.4   |                                 | 3.2   |   |      |   | 2.0  |                     |  | 27.6    |    |  |   | 26.6  |   |  | 3.7   |    |  |   | 20.9  |   |  | 3.3   |    |  |   | 5.7  |   |  | 27.3    |   
|Other expense (income), net                       |  |                                  |      |   |      |      |    |                     |   | 0.1   |                                 | 0.1   |   |      |   | (0.1 | )                   |  | (100.0  | )  |  |   |      |   |  |      |    |  |   | 0.6   |   |  | 0.1   |    |  |   | (0.6 | ) |  | (100.0  | ) 
|Income tax provision (benefit)                    |  |                                  | 0.1   |   |      |      |    |                     |   | 0.7   |                                 | 0.3   |   |      |   | (0.6 | )                   |  | (82.5   | )  |  |   | (2.5  | ) |  | (0.4  | )  |  |   | (1.7  | ) |  | (0.3  | )  |  |   | (0.8 | ) |  | (50.1   | ) 
|                                                  |  |                                  |       |   |      |       |    |                     |   |       |                                 |       |   |      |   |      |                     |  |         |    |  |   |       |   |  |       |    |  |   |       |   |  |       |    |  |   |      |   |  |         |   
|Net Income (Loss)                                 |  | $                                | (1.7  | ) |      | (0.7  | )% |                     | $ | 1.7   |                                 | 0.7   | % |      | $ | (3.4 | )                   |  | (100.0+ | )% |  | $ | (5.2  | ) |  | (0.7  | )% |  | $ | (2.3  | ) |  | (0.4  | )% |  | $ | (2.8 | ) |  | (100.0+ | )%
|                                                  |  |                                  |       |   |      |       |    |                     |   |       |                                 |       |   |      |   |      |                     |  |         |    |  |   |       |   |  |       |    |  |   |       |   |  |       |    |  |   |      |   |  |         |   



Three months ended
September 30, 2005 compared to the three months ended September 30, 2004



Net Sales. Net sales increased by approximately $24.3 million, or 10.5%, from $231.3 million for the three months ended September 30, 2004 to $255.6 million for the three months ended September 30,
2005. Net of a $24.3 million contribution to the increase in net sales from the acquired NES business, net sales were flat during the three months ended September 30, 2005 compared to the three months ended September 30, 2004, as a result
of the net impact of a 3.5% decrease in unit volume (estimated impact of $7.7 million) offset by improved average selling prices (estimated impact of $7.7 million). The increase in average selling price was the combined result of improved mix of
higher price point private label and exclusive products slightly offset by year-over-year average selling price declines of our trade brand products. Trade brand products continued to be adversely impacted by capacity constraints at certain of our
key suppliers during much of the third quarter of 2005. These capacity constraints eased by the end of the quarter. Volume levels decreased primarily as a result of the supply constraints and a corresponding reduction in supplier promotions.



Gross Profit. Gross profit increased by $3.7 million,
or 9.1%, from $40.5 million for the three months ended September 30, 2004 to $44.2 million for the three months ended September 30, 2005. Net of a $4.4 million contribution to the increase in gross profit from the acquired NES business,
gross profit decreased $0.7 million, or 1.8%, during the three months ended September 30, 2005 compared to the three months ended September 30, 2004. The decrease in gross profit for the Broder and Alpha divisions was primarily due to
lower gross profits in our trade brand products resulting from lower unit volume and lower revenues, partially offset by higher gross profits resulting from migration to private label and exclusive products, which generally have significantly higher
gross margins.



Gross margin decreased from 17.5% for the three
months ended September 30, 2004 to 17.3% for the three months ended September 30, 2005. Net of the impact on gross margin resulting from the inclusion of NES in the three months ended September 30, 2005, gross margin decreased from
17.5% to 17.2%.



Warehousing, Selling and Administrative
Expenses (Excluding Depreciation and Amortization). Warehousing, selling and administrative expenses increased $5.0 million, or 19.7%, from $25.6 million for the three months ended September 30, 2004 to $30.7 million for the three months
ended September 30, 2005. Net of an increase of $2.7 million of warehousing, selling and administrative expenses from the acquired NES business, the increase was $2.3 million, or 9.5%, reflecting the net impact of: (i) estimated savings of
approximately $0.5 million from the elimination of duplicative head count positions and the closure of facilities during 2004 in connection with the Alpha and NES integrations; (ii) increased investment in sales and marketing activities related
to expansion of our private label products including the launch of four new private label brands, expansion of our outside sales force and the addition of an inside sales department for the Broder division (estimated combined impact $1.0 million);
(iii) incremental expenses for expanded space in certain distribution facilities and the



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relocation of our corporate headquarters (estimated combined impact of $0.7 million); and (iv) increases in telecom, consulting and other administrative
expenses partially offset by incremental cost savings due to efficiencies in distribution and customer service operations and lower unit volume.



Depreciation and Amortization.Depreciation and amortization expense was $4.8 million for the three months ended September 30, 2005 and 2004.
Net of an increase of $0.5 million in depreciation and amortization from the acquired NES division, depreciation and amortization decreased by $0.5 million primarily due to a decrease in amortization of intangible assets.



Restructuring and Asset Impairment Charges. As more fully described in
Note 8 to the consolidated financial statements, we recorded restructuring charges of $0.9 million during the three months ended September 30, 2005 related to the planned closure of our Broder division Atlanta distribution facility and $0.2
million in severance and related benefits during the three months ended September 30, 2004 related to the integration of Alpha. Following the acquisition of Alpha in September 2003, we changed the inventory replenishment strategy of the
combined company and performed a detailed review of our combined operations in order to identify areas of overlap and potential cost savings. As a result, we effected a restructuring plan designed to reduce our cost structure by eliminating
duplicate head count and closing certain distribution centers. The Alpha integration was completed in fiscal 2004. During the quarter ended September 30, 2005, we initiated a plan to close our existing Broder division Atlanta facility which
will be replaced by a larger facility in the Atlanta area.



Income from Operations. As a result of the factors described above, income from operations decreased by approximately $2.1 million, from $9.9 million for the three months ended September 30, 2004 to $7.8 million for the three
months ended September 30, 2005.



Interest and Other
Expense. Interest expense, net increased by $2.0 million, or 27.6%, from $7.4 million for the three months ended September 30, 2004 to approximately $9.4 million for the three months ended September 30, 2005. The net increase is
primarily due to (i) $50.0 million of incremental 111/4% Senior Notes outstanding during the three months
ended September 30, 2005 that were issued in November 2004 and proceeds from which were used to pay down our revolving debt including borrowings to finance the NES transaction (impact of $0.5 million); (ii) higher debt levels necessary to
support the incremental NES business and increased investment in working capital as well as an increase of approximately 200 basis points in the average interest rate on our revolving debt (combined impact of $1.4 million); and (iii) a $0.1
million net positive effect of changes in the fair value of interest rate swaps ($0.2 million and $0.1 million net positive effect for the three months ended September 30, 2005 and 2004, respectively). Other expense for the three months ended
September 30, 2004 was $0.1 million.



Income Tax
Provision. The provision for income taxes was approximately $0.1 million and $0.7 million for the three months ended September 30, 2005 and 2004, respectively. The difference between the U.S. federal statutory rate of 34% and the effective
benefit rate relates primarily to state and local taxes and meals and entertainment.



Net Income (Loss). As a result of the factors described above, net income decreased by $3.4 million, from a net income of $1.7 million for the three months ended September 30, 2004 to a net loss of $(1.7)
million for the three months ended September 30, 2005.



Nine months
ended September 30, 2005 compared to the nine months ended September 30, 2004



Net Sales. Net sales increased by approximately $80.1 million, or 12.6%, from $635.4 million for the nine months ended September 30, 2004 to $715.4 million for the nine months ended September 30,
2005. Net of an $85.7 million contribution to net sales from the acquired NES business, net sales decreased $5.6 million, or 0.9%, during the nine months ended September 30, 2005 compared to the nine months ended September 30, 2004. The
decrease resulted from the net impact of a 2.9% decrease in unit volume (estimated impact of $18.3 million) partially offset by a favorable product mix shift and improved average selling prices (estimated impact of $12.7 million). The product mix
shift and change in average selling price was attributable to higher unit volume in private label and exclusive products and decreases in our unit volumes of trade brand products.



Gross Profit. Gross profit increased by $16.7 million, or 14.8%, from $112.4 million for the nine months ended
September 30, 2004 to $129.1 million for the nine months ended September 30, 2005. Net of a $15.8 million contribution in the increase to gross profit from the acquired NES business, gross profit increased $0.8 million, or 0.8%, during the
nine months ended September 30, 2005 compared to the nine months ended September 30, 2004. In addition to lower volumes during the nine months ended September 30, 2005, gross profit was also impacted negatively by more aggressive
pricing in our trade brands in an effort to stimulate volume growth in the absence of supplier sponsored promotions. The volume and



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pricing impact on trade brand gross profit was more than offset by improvement resulting from migration to private label and exclusive products, which
generally have significantly higher gross margins.



Gross
margin increased from 17.7% for the nine months ended September 30, 2004 to 18.0% for the nine months ended September 30, 2005. Net of the impact on gross margin resulting from the inclusion of NES in the nine months ended
September 30, 2005, gross margin increased from 17.7% to 18.0%.



Warehousing, Selling and Administrative Expenses (Excluding Depreciation and Amortization). Warehousing, selling and administrative expenses increased $15.5 million, or 19.8%, from $77.9 million for the nine months ended
September 30, 2004 to $93.4 million for the nine months ended September 30, 2005. Net of an increase of $11.0 million of warehousing, selling and administrative expenses from the acquired NES business, the increase was $4.5 million, or
5.9%, reflecting the net impact of: (i) estimated savings of approximately $2.0 million from the elimination of duplicative head count positions and the closure of facilities during 2004 in connection with the Alpha and NES integrations;
(ii) increased investment in sales and marketing activities related to expansion of our private label products including the launch of four new private label brands, expansion of our outside sales force, the addition of an inside sales
department for the Broder division (estimated combined impact $4.0 million); (iii) incremental expenses for expanded space in certain distribution facilities (estimated combined impact $1.6 million); and (iv) increases in telecom,
consulting and other administrative expenses partially offset by incremental cost savings due to efficiencies in and customer service operations and lower unit volume.



Depreciation and Amortization.Depreciation and amortization expense increased approximately $0.2 million, or 1.7%,
from $14.5 million for the nine months ended September 30, 2004 to $14.8 million for the nine months ended September 30, 2005. Net of increased depreciation and amortization of $2.1 million for the acquired NES division, depreciation and
amortization decreased by $1.9 million, primarily due to a decrease in amortization of intangible assets.



Restructuring and Asset Impairment Charges. As more fully described in Note 8 to the consolidated financial statements, we recorded restructuring
charges of approximately $2.0 million during the nine months ended September 30, 2005 related to the integration of NES and the closures of two Broder division distribution facilities and we recorded a restructuring charge of $2.5 million
during the nine months ended September 30, 2004 related to the integration of Alpha. As previously disclosed, the Alpha integration was completed in fiscal 2004 and in connection with the acquisition of NES in August 2004, we developed a
restructuring plan during the three months ended December 31, 2004. This plan included the closure of one of our Charlotte, North Carolina distribution facilities and the reduction of head count for duplicative general and administrative
functions. The Charlotte facility closure occurred during the three months ended March 31, 2005. The closure of the Broder division Atlanta facility is expected to occur during the fourth quarter of 2005 and it will be replaced by a larger
facility in the Atlanta area.



Income from Operations.
As a result of the factors described above, income from operations increased by approximately $1.5 million, from $17.5 million for the nine months ended September 30, 2004 to $18.9 million for the nine months ended September 30, 2005.



Interest and Other Expense. Interest expense, net
increased by $5.7 million, or 27.3%, from $20.9 million for the nine months ended September 30, 2004 to $26.6 million for the nine months ended September 30, 2005. The net increase is primarily due to (i) $50.0 million of incremental
111/4% Senior Notes outstanding during the nine months ended September 30, 2005 that were issued in
November 2004 and proceeds from which were used to pay down our revolving debt including borrowings to finance the NES transaction (impact of $2.2 million); (ii) higher debt levels necessary to support the incremental NES business and increased
investment in working capital as well as an increase of approximately 300 basis points in the average interest rate on our revolving debt (combined impact of approximately $2.9 million); and (iii) a $0.4 million net negative effect of changes
in the fair value of interest rate swaps ($0.8 million and $1.2 million net positive effect for the nine months ended September 30, 2005 and 2004, respectively). Other expense of $0.6 million for the nine months ended September 30, 2004
included a $0.2 million charge related to the early retirement of a deferred compensation arrangement and a $0.2 million litigation settlement.



Income Tax Benefit. The income tax benefit was approximately $2.5 million and $1.7 million for the nine months ended September 30, 2005 and
2004, respectively. The difference between the U.S. federal statutory rate of 34% and the effective benefit rate relates primarily to state and local taxes and meals and entertainment.



Net Loss. As a result of the factors described above, net loss increased by $2.8 million, from a net loss of $(2.3)
million for the nine months ended September 30, 2004 to a net loss of $(5.2) million for the nine months ended September 30, 2005.



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Liquidity and Capital Resources



Cash Flows



Nine months ended September 30, 2005 compared to nine months ended September 30, 2004



Net cash used in operating activities was approximately $21.9 million for
the nine months ended September 30, 2005 compared to cash provided by operating activities of approximately $35.9 million for the nine months ended September 30, 2004. The change in cash flows from operating activities was due principally
to $44.1 million of incremental increase in inventory during the nine months ended September 30, 2005 relative to the nine months ended September 30, 2004. The increase was significantly driven by private label inventories.



Net cash used in investing activities was $3.7 million for the nine months
ended September 30, 2005. Net cash used in investing activities was $34.9 million during the nine months ended September 30, 2004 and was attributable to the acquisition of NES in August 2004 and capital expenditures of $3.2 million.



Net cash provided by financing activities was approximately
$30.0 million for the nine months ended September 30, 2005 compared to $1.3 million for the nine months ended September 30, 2004. The change in cash flows from financing activities was primarily attributable to the incrementally higher net
borrowings on our revolving credit agreement to support our increases in inventory during the nine months ended September 30, 2005 relative to the nine months ended September 30, 2004 as described under cash flows from operating
activities, the change in the book overdraft position and the sale of $13.3 million of common stock used to partially finance the acquisition of NES.



Liquidity Position



We entered into a revolving credit facility on September 22, 2003, which provided for aggregate borrowings of up to $175.0 million, including
provision for up to $25.0 million of letters of credit. In September 2005, we exercised our option to increase the revolving credit facility by $50.0 million for aggregate borrowings up to $225.0 million. As of September 30, 2005, outstanding
borrowings on the revolving credit facility were $105.4 million, and outstanding letters of credit were $10.5 million, which left $98.0 million of available borrowing capacity as determined by borrowing base availability.



The revolving credit facility is secured by first priority pledges of all the
equity interests owned by us in our domestic subsidiaries and 66% of all equity interests in any future foreign subsidiaries. The revolving credit facility is also secured by first priority interests in, and mortgages on, substantially all tangible
and intangible assets and each of our direct and indirect domestic subsidiaries and 66% of the equity interests of any future foreign subsidiaries. Availability under the revolving credit facility is based on a borrowing base calculated using
advance rates applied to eligible accounts receivable and eligible inventory. The borrowing base will be monitored continuously at least on a monthly basis. The revolving credit facility is available until September 2008.



In September 2003, we completed a private offering of $175.0 million
111/4% Senior Notes due 2010. The proceeds of the private offering were used to finance the Alpha acquisition,
repay existing indebtedness and to pay related fees and expenses. In November 2004, we completed a private offering of an additional $50.0 million 111/4% Senior Notes due 2010. The proceeds of the private placement were used to repay borrowings under the revolving credit facility. All senior notes were issued under the same indenture. The senior
notes are guaranteed on a senior unsecured basis by all existing and future material domestic subsidiaries, and pay interest semi-annually in arrears on April 15 and October 15 of each year.



The indenture governing the senior notes and the revolving credit facility,
among other things, (1) restrict the ability of us and our subsidiaries, including the guarantors of the notes, to incur additional indebtedness, issue shares of preferred stock, incur liens, pay dividends or make certain other restricted
payments and enter into certain transactions with affiliates, (2) prohibit certain restrictions on the ability of certain of our subsidiaries, including the guarantors of the notes, to pay dividends or make certain payments to us and
(3) place restrictions on the ability of us and our subsidiaries, including the guarantors of the notes, to merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of
our assets. The indenture related to these notes and the revolving credit facility also contains various covenants which limit our discretion in the operation of our businesses. As of September 30, 2005, we were in compliance with all covenants
under the indenture and the credit facility.



We rely primarily
upon cash flow from operations and borrowings under our revolving credit facility to finance operations, capital expenditures and fluctuations in debt service requirements. Availability under the revolving credit facility fluctuates due to seasonal
flows of the business, which impacts our borrowing base and our decisions around investment in inventory and overall growth of the business. Historically, the low point of our availability arises during the first and second



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quarters of each fiscal year as revenues reach seasonal lows during December, January and February, compounded by the simultaneous consumption of
availability to bolster inventory levels for the ensuing season.



The low point of our availability (high point of borrowings) occurred during June 2005, and the borrowings at peak points during the third quarter approached the levels experienced at June 2005. We expect the high point of our availability
(low point of borrowings) to occur in November 2005 as a result of seasonal paydown. We believe that our ability to manage cash flow and working capital levels, particularly inventory and accounts payable, will allow us to meet our current and
future obligations during the seasonal low period, pay scheduled principal and interest payments, and provide funds for working capital, capital expenditures and other needs of the business for at least the next twelve months. However, no assurance
can be given that this will be the case, and we may require additional debt or equity financing to meet our working capital requirements.



As a part of our business strategy, we will continue to look for acquisitions of distributors with high local market share in regions that are not well
served by our existing facilities. We have historically engaged in discussions with several potential acquisition candidates. Most of these discussions were preliminary in nature, with limited due diligence conducted. We cannot guarantee that any
acquisitions will be consummated. If we do consummate any acquisition, it could be material to our business and require us to incur additional debt under our revolving credit facility or otherwise. There can be no assurance that additional financing
will be available when required or, if available, that it will be on terms satisfactory to us.



Off Balance Sheet Arrangements



Our revolving credit facility contains provision for up to $25.0 million of letters of credit, subject to borrowing base availability and total amounts outstanding under the revolving credit agreement of $225.0 million. As of
September 30, 2005, we had approximately $10.5 million of outstanding letters of credit related to commitments for the purchase of inventory.



We purchase product in the normal course through the use of short term purchase orders representing quantities for normal business needs at current market
prices. In addition, we are party to two supply agreements whereby we have committed to purchase a minimum of: (i) $4.0 million of product per year in 2005 and 2006 and another $2.5 million per year in 2007 and 2008; and (ii) a total of
$15.0 million at a minimum of $5.0 million of product per year through 2007. These supply agreements are more fully described in the following section Contractual Cash Obligations.



Contractual Cash Obligations



The following table presents the aggregate amount of future cash outflows
under our contractual cash obligations and commercial commitments as of September 30, 2005:



|                                   |  |                        |       |                 |   |             |  |             |       |              |   |      |  |   |      
|---------------------------------- |  | ---------------------- | ----- | --------------- | - | ----------- |  | ----------- | ----- | ------------ | - | ---- |  | - | -----
|                                   |  | Payments Due by Period
|                                   |  | Total                  |       | Less than1 year |   | 1 to 3years |  | 4 to 5years |       | After 5years
|                                   |  | (dollars in millions) 
|Revolving credit facility          |  | $                      | 105.4 |                 | $ |            |  | $           | 105.4 |              | $ |     |  | $ |     
|Senior notes(1)                    |  |                        | 225.0 |                 |   |            |  |             |      |              |   |     |  |   | 225.0
|Operating lease obligations        |  |                        | 82.8  |                 |   | 12.6        |  |             | 23.3  |              |   | 22.4 |  |   | 24.5 
|Capital lease obligations          |  |                        | 2.6   |                 |   | 1.1         |  |             | 1.3   |              |   | 0.2  |  |   |     
|Supply agreements(2)               |  |                        | 20.6  |                 |   | 8.3         |  |             | 11.7  |              |   | 0.6  |  |   |     
|Expected interest payments(3)      |  |                        | 130.5 |                 |   | 26.1        |  |             | 52.2  |              |   | 50.7 |  |   | 1.5  
|                                   |  |                        |       |                 |   |             |  |             |       |              |   |      |  |   |      
|Total contractual cash obligations |  | $                      | 566.9 |                 | $ | 48.1        |  | $           | 193.9 |              | $ | 73.9 |  | $ | 251.0
|                                   |  |                        |       |                 |   |             |  |             |       |              |   |      |  |   |      

---

|(1) | Amounts shown do not include $1.3 million of unamortized premium that will be amortized over the term of the senior notes.
|--- | --------------------------------------------------------------------------------------------------------------------------



|(2) | We are party to two separate supply agreements. In one supply agreement we are committed to purchase a minimum of $4.0 million of product per year in 2005 and 2006 and another $2.5
million per year in 2007 and 2008. Any shortfall in committed purchases for a given year may be carried forward or backward one year, subject to certain limits. If after carry forward or backward, actual purchases still fall short of committed
levels, a penalty of 7.5% of the shortfall will be incurred. In the other supply agreement we have committed to purchase a total of $15.0 million at a minimum of $5.0 million of product per year through 2007. We do not believe these purchase
commitments exceed normal requirements.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Represents expected interest payments for the life of the senior notes.
|--- | -----------------------------------------------------------------------



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Litigation



We are party to various lawsuits arising out of the normal conduct of our business, none of which, individually or in the aggregate, are expected to have
a material adverse effect on our results of operations or financial position.



Inflation



Prices of imprintable sportswear
and accessories have experienced deflation as suppliers have moved manufacturing to lower cost offshore locations. Price deflation has not historically had a material effect on operating results during the periods presented, since falling input
costs for individual products have generally been passed on to customers on a constant gross profit per unit basis. However, we cannot assure you that this trend will continue in the future.



Seasonality



Historically, the first quarter of our fiscal year generates the lowest levels of net sales, gross profit and operating
profit. During 2004, pro forma for the effect of the acquisition of NES, first and second quarter net sales were approximately 21.1% and 27.6%, respectively, of the total for the year and first and second quarter gross profit was approximately 20.8%
and 27.1%, respectively, of the total for the year. Due to the level of fixed operating expenses, operating profit is normally significantly lower in the first quarter of our fiscal year. During fiscal year 2004, 100% of our operating profit was
earned in the second, third and fourth quarters.



Critical Accounting
Policies



Our significant accounting policies are
described in Note 1 to the Consolidated Financial Statements included elsewhere in this report and in Note 1 to the Consolidated Financial Statements included in the Form 10-K filed with the SEC on March 25, 2005. While all significant
accounting policies are important to our consolidated financial statements, some of these policies may be viewed as being critical. Such policies are those that are both most important to the portrayal of our financial condition and require our most
difficult, subjective and complex estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. These estimates are based upon our historical
experience and on various other assumptions that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates under different assumptions or conditions. We believe our most critical accounting policies are
as follows:



Revenue Recognition. Revenue is recognized
when title and risk of loss is transferred to the customer. Revenue includes selling price of the product and all shipping and handling costs paid by the customer. Under certain circumstances, customers may submit a claim for damaged or shorted
shipments. Based on historical experience, we establish a reserve for potential returns at the time of sale. Revenue is further reduced at the time of sale for estimated customer-related incentives. These incentives primarily consist of volume and
growth rebates.



Accounts Receivable. We maintain an
allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments, which is included in bad debt expense. We determine the adequacy of this allowance by regularly reviewing our accounts
receivable aging and evaluating individual customer receivables, considering customers financial condition, credit history and current economic conditions. If the financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be required.



Inventories. We maintain an allowance for potential losses on the disposal of our discontinued and slow moving inventory. Estimates for the allowance are based on past and estimated future sales of the product,
historical realization of similar discontinued product, and potential return of slow moving and discontinued product back to the mill. Cost of sales includes (i) the cost of product, (ii) inbound and outbound freight costs, (iii) the
costs of purchasing, receiving, inspecting and handling, and (iv) adjustments for various incentive programs offered to us by our vendors.



Derivative Financial Instruments. We do not use derivatives for speculative purposes. However, we have entered into interest rate protection
agreements whereby we have contracted to pay a fixed interest rate in exchange for receipt of a variable rate. We have elected not to apply hedge accounting for the currently outstanding interest rate protection agreements. Accordingly, we record
current interest rate swaps at fair value and record gains and losses on these contracts through our statement of operations. We will evaluate any future interest rate swaps and for those which qualify and for which we choose to designate as hedges
of future cash flows, the effective portion of changes in fair value will be recorded temporarily in equity, then recognized in earnings along with the related effects of the hedged items.



Goodwill and Intangible Assets. We adopted SFAS No. 142,
Goodwill and Other Intangible Assets as of January 1, 2002. Under SFAS No. 142, goodwill and intangible assets with indefinite lives are not amortized; rather, they are tested for



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impairment on at least an annual basis. Accordingly, we ceased amortization of all goodwill and performed a goodwill impairment evaluation upon adoption and
at each year end using discounted expected future cash flows. In addition, we have recorded other indefinite-lived intangible assets (the tradenames Alpha, Alpha Shirt Company, as well as certain finite-lived intangible
assets (primarily the tradenames NES Clothing and Harvard Square, and customer relationship intangibles). These finite-lived intangible assets are being amortized on a straight-line basis over their average useful lives
ranging from 2 to 8 years.



Recent Accounting Pronouncements



In November 2004, the FASB issued SFAS No. 151, Inventory
Costs an amendment of ARB No. 43, Chapter 4 (SFAS No. 151). SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and
rehandling costs may be so abnormal as to require treatment as current period charges. SFAS No. 151 requires that those items be recognized as current-period charges regardless of whether they meet the criterion of so
abnormal. In addition, SFAS No. 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of SFAS No. 151 shall be applied
prospectively, effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted. We are currently assessing the impact that SFAS No. 151 would have on our consolidated financial
statements.



In December 2004, the FASB issued SFAS
No. 153, Exchanges of Nonmonetary Assets an amendment of APB Opinion No. 29 (SFAS No. 153). SFAS No. 153 addresses the measurement of exchanges of nonmonetary assets. It eliminates the exception from fair
value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and replaces it with an exception for exchanges that do not have commercial
substance. SFAS No. 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 shall be applied
prospectively, effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted. We have not entered into nonmonetary exchanges; accordingly, we anticipate that SFAS
No. 153 will not have a material effect on our financial condition, results of operations or cash flows.



In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (FIN 47),
an interpretation of SFAS No. 143, Accounting for Asset Retirement Obligations. FIN 47 clarifies that an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value
of the liability can be reasonably estimated. FIN 47 addresses asset retirement obligations where an entity has a legal obligation to perform an asset retirement activity in which the timing and method of settling the obligation are conditional upon
a future event that may or may not be within the entitys control. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. This interpretation is effective
no later than the end of fiscal years ending after December 15, 2005. Earlier application is permitted . We are currently assessing the impact that FIN 47 would have on our consolidated financial statements.



In May 2005, the FASB issued SFAS No. 154, Accounting Changes and
Error Corrections, (SFAS No. 154) which replaces Accounting Principles Board Opinion No. 20, Accounting Changes and SFAS No. 3 Reporting Accounting Changes in Interim Financial Statements and
changes the requirements of the accounting for and reporting of a change in accounting principle. SFAS No. 154 applies to all voluntary changes in accounting principles. SFAS No. 154 requires retrospective application to prior
periods financial statements of changes in accounting principle, unless it is impracticable to do so. SFAS No. 154 also requires that a change in depreciation, amortization or depletion method of long-lived, non-financial assets be
accounted for as a change in accounting estimate effected by a change in accounting principle. SFAS No. 154 will be effective for accounting changes and corrections of errors made during fiscal years beginning after December 15, 2005. This
statement does not change the transition positions of any existing accounting pronouncements, including those that are in a transition phase as of the effective date of this statement. We are currently assessing the impact that FIN 47 would have on
our consolidated financial statements.



Sarbanes-Oxley Section 404
Compliance



We incur certain costs associated with being
an SEC registrant because we registered debt securities in April 2004. We had previously expected to incur approximately $1.2 million during fiscal 2005 in direct and indirect costs associated with Sarbanes-Oxley Section 404 compliance, but on
March 2, 2005, the SEC extended the compliance dates for non-accelerated filers regarding amendments to the SECs rules under the Securities Exchange Act of 1934 and on September 21, 2005, the SEC further extended the compliance
dates. Under the latest extension, a company that is not required to file its annual and quarterly reports on an accelerated basis must begin to comply with the internal control over financial reporting requirements



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for its first fiscal year ending on or after July 15, 2007. This is a two-year extension from the originally established July 15, 2005 compliance
date for non-accelerated filers. We are currently a non-accelerated filer because we do not have common equity securities registered with the SEC. We are currently evaluating the timing of documenting and/or implementing the additional processes and
procedures necessary for Sarbanes-Oxley Section 404 compliance.



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS



Information contained in this Quarterly Report on Form 10-Q, other than historical information, may be considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be
identified by the use of forward-looking words such as believes, expects, may, will, should, seeks, approximately, intends, plans,
estimates or anticipates or the negative of these terms or other comparable words, or by discussions of strategy, plans or intentions. Examples of forward-looking statements are statements that concern future revenues, future
costs, future capital expenditures, business strategy, competitive strengths, competitive weaknesses, goals, plans, references to future success or difficulties relating to acquisitions or similar strategic transactions and other similar
information.



As used in this Form 10-Q, unless the context
indicates otherwise: (i) the Company, refers collectively to Broder Bros., Co. and its consolidated subsidiary; (ii) Alpha refers to the Companys Alpha Shirt Company division for periods after its acquisition
by the Company; (iii) Broder division refers to the Companys Broder division; and (iv) NES refers to the Companys NES Clothing Company division for periods after its acquisition by the Company. See Note
7 to the Consolidated Financial Statements for segment information.



The forward-looking statements in this document are based on our expectations and are necessarily dependent upon assumptions, estimates and data that we believe are reasonable and accurate but may be incorrect, incomplete or imprecise.



Although we believe that the expectations reflected in any of
our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking
statements, are subject to change and to inherent risks and uncertainties, such as those disclosed in this document. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from
estimates or projections contained in forward-looking statements include, among others, the following:



| |  |  | Significant Competitive Activity. The imprintable sportswear and accessories market is a fragmented industry that is highly competitive, and we face significant competition
from national, regional and local distributors. Competition is based on price, product quality, breadth of product selection, quality of service and delivery times. To the extent that one or more of our competitors gains an advantage with respect to
any key competitive factor, we could lose customers and our sales may decline. In particular, we may need to adjust our pricing policies to compete effectively. To the extent we delay or fail to implement appropriate pricing adjustments, our
financial performance may be adversely affected if any of our competitors reduce their prices or fail to increase prices in line with increases in our costs and expenses.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | General Economic Conditions. Our business is sensitive to the business cycle of the national economy. A decline in general economic conditions may adversely affect demand for
our products, which could cause sales of our products to decrease. Slowdowns in economic activity have in the past, and may in the future, result in our customers shifting their purchases towards lower-priced products, such as T-shirts, which
adversely affects our gross profit margin. These factors have contributed historically to fluctuations in our results of operations and such fluctuations are expected to occur in the future. A decline in the demand for our products or a mix shift to
lower margin products due to deteriorating economic conditions could have a material adverse effect on our results of operations and financial condition.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Dependence on a Limited Number of Suppliers. We obtain a significant portion of the products we sell from a limited group of suppliers. From time to time, we may experience
difficulties in receiving orders from some of these suppliers or certain products may not be available. Their ability to supply us with our products is subject to a number of risks, including production problems at our suppliers facilities,
work stoppages or strikes by our suppliers employees. The partial or complete loss of any of these sources could have an adverse effect on our results of operations and damage customer relationships. Our relationships with suppliers are
generally not governed by written contracts. Accordingly, they generally may be terminated at will by the supplier at any time. The loss of any of these suppliers could have an adverse effect on our sales and profitability. In addition, a
significant increase in the price of one or more of the products we obtain from these key suppliers could materially and adversely affect our results of operations.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Disruptions in our Distribution Centers. We maintain 17 distribution centers and may establish additional facilities to expand into new markets. A serious disruption to any
distribution center or to the flow of goods in or out of our centers due to fire, earthquake, act of terrorism or any other cause could damage a significant portion of our inventory and could materially impair our ability to distribute our products
to customers in a timely manner or at a reasonable cost. We could incur significantly higher costs and longer lead times associated with distributing our products to our customers during the time that it takes for us to reopen or replace a
distribution center. As a result, any such disruption could have a material adverse effect on our business, results of operations and financial condition.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Private Label Product Initiatives. Our strategy includes a growing emphasis on developing, sourcing and distributing our own private label products which are complementary to
our existing trade brands. While we believe increased emphasis on private label products adds value and profitability to our business, it also adds additional complexity to our operations, increases our working capital investment and presents an
increased level of inventory risk. Our inability to manage these complexities and risks may adversely affect our results of operations and financial condition.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Integration of Acquisitions. We may not realize all of the anticipated operating synergies and cost savings from the Alpha acquisition or the NES acquisition and we may
experience difficulties in integrating the operations of NES with our operations. We may not be able to successfully integrate and streamline overlapping functions or, if such activities are successfully accomplished, that such integration will not
be more costly to accomplish than presently contemplated. In addition, we could encounter difficulties in managing the combined company due to its increased size and scope of operations.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Acquisition Strategy. We have expanded our business partly through acquisitions and establishing new distribution facilities in new markets and may continue to do so in the
future. We may not succeed in: (i) identifying suitable acquisition candidates; (ii) completing acquisitions; (iii) integrating acquired operations into our existing operations; or (iv) expanding into new markets either through
acquisitions or establishing new facilities. In addition, future acquisitions could have an adverse effect on our operating results, particularly in the fiscal quarters immediately following their completion while we integrate the operations of the
acquired business. Acquired operations or new facilities may not achieve levels of revenues, profitability or productivity comparable with those achieved by our existing operations, or otherwise perform as expected.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Substantial Level of Indebtedness. As of September 30, 2005, we had approximately $330.4 million of borrowings under our senior notes indenture and revolving credit
facility, and subject to restrictions therein, we may incur additional indebtedness. We expect to obtain the money to pay our expenses and service our debt obligations from cash flows from our operations. Our ability to meet our expenses thus
depends on our future performance, which will be affected by financial, business, economic and other factors. We will not be able to control many of these factors, such as economic conditions in the markets where we operate and pressure from
competitors. Our cash flow may not be sufficient to enable us to pay principal and interest on our debt and meet our other obligations. If we do not have enough liquidity, we may be required to refinance all or part of our existing debt, sell assets
or borrow more money. We may not be able to do so on terms acceptable to us, or at all.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



These and other applicable risks are described under the caption Special Note Regarding Forward-Looking Statements in the Companys Form
10-K filed with the SEC. We assume no obligation to publicly update or revise any forward-looking statement made in this report, whether as a result of new information, future events, changes in assumptions or otherwise, after the date of this
report. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements.



|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------



As of September 30, 2005, we had $105.4 million of debt outstanding under our revolving credit facility. Our revolving credit facility is subject to
variable interest rates. Accordingly, our earnings and cash flow are affected by changes in interest rates. Assuming the September 30, 2005 level of borrowings, and further considering the interest rate protection agreements currently in place
(see following paragraph), we estimate that a one percentage point increase in interest on our variable rate debt agreements would have increased interest expense for the three and nine months ended September 30, 2005 by approximately $0.2
million and $0.7 million, respectively.



We have entered into
interest rate protection agreements whereby we have contracted to pay a fixed interest rate in exchange for receipt of a variable rate. The $10.0 million notional principal amount under interest rate protection agreement terminates in October 2008.
We have elected not to apply hedge accounting for the currently outstanding interest rate



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protection agreement. Accordingly, we record our interest rate swaps at fair value on the balance sheet and record gains and losses on this contract as well
as the periodic settlements of this contract through our statement of operations. We recorded other income of approximately $0.2 million and $0.1 million during the three months ended September 30, 2005 and 2004, respectively. We recorded other
income of approximately $0.8 million and $1.2 million during the nine months ended September 30, 2005 and 2004, respectively.



|Item 4. | Controls and Procedures
|------- | -----------------------



Evaluation of Disclosure Controls and Procedures



Our Interim Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in
the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, they have concluded that, as of the end of the period covered by this report, our
disclosure controls and procedures are effective.



Changes in Internal
Controls Over Financial Reporting



There were no changes
during the third quarter of fiscal 2005 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.



PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------



We are involved from time to time in routine legal matters and other claims incidental to our business. When it appears probable in managements
judgment that we will incur monetary damages or other costs in connection with such claims and proceedings, and such costs can be reasonably estimated, liabilities are recorded in the financial statements and charges are recorded against earnings.
We believe the resolution of such routine matters and other incidental claims, taking into account reserves and insurance, will not have a material adverse effect on our financial condition or results of operations.



|Item 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
|------- | --------------------------------------------------------------------------------



None.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------



None.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------



None.



|Item 5. | Other Information
|------- | -----------------



None.



|Item 6. | Exhibits
|------- | --------



|            |  |                                                                                                                                                                                   
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                       
|            | 
|31.1        |  | Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                
|            | 
|31.2        |  | Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                
|            | 
|32.1        |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 9.06 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation
S-K).
|            | 
|32.2        |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 9.06 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation
S-K).



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SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                 |  |  |  |                   |  |     |  |                                             
|---------------- |  |  |  | ----------------- |  | --- |  | --------------------------------------------
|November 8, 2005 |  |  |  | BRODER BROS., CO.
|                 |  |  |  |                  
|                 |  |  |  |                   |  | By: |  | /s/    THOMAS MYERS                         
|                 |  |  |  |                   |  |     |  | Thomas Myers                                
|                 |  |  |  |                   |  |     |  | Interim Chief Executive Officer and Director
|                 |  |  |  |                   |  |     |  | (Principal Executive Officer)               
|November 8, 2005 |  |  |  |                   |  |    
|                 |  |  |  |                  
|                 |  |  |  |                   |  | By: |  | /s/    DAVID J.
HOLLISTER                   
|                 |  |  |  |                   |  |     |  | David J. Hollister                          
|                 |  |  |  |                   |  |     |  | Chief Financial Officer and Secretary       
|                 |  |  |  |                   |  |     |  | (Principal Financial and Accounting Officer)



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